Monday, December 10, 2007

Chicago's Quarterly Housing Market Report

The latest Chicago Home BUZZ report has almost been completed (just awaiting final few weeks of the year) but the results are staggering. The overall decrease from 2006 to 2007 in the fourth quarter was over 130% decrease in total sales volume from just one year ago.

Some of the leading declines in the City of Chicago included the Bucktown/Logan Square (60647) neighborhoods where there was an almost 300% decrease in single-family (detached) home sales from $32,898,835 in total sales in 2006 down to only $8,214,800 for the fourth quarter (2007). The Hyde Park neighborhood (60619) saw single-family homes drop from $3.6M down to under $1M in sales, down 287%.

Rogers Park condominiums saw only 45 sales last quarter, an over 230% decrease from the prior years 149 units.

The suburbs saw some areas with even worse showings including single-family sales in Highland Park where only four homes sold last quarter totaling $1,753,600 in sales down over a whopping 400% from the $8,888,000 last year.

Over all total sales volume for the quarter was $1.5 billion down over 130% from the $3.5 billions last year.

For more information and a free quarterly update of your neighborhood visit our Chicago HOME BUZZ page at and see all the data and statistics.

If you'd like an Interactive Market Update of your neighborhood request a
Market Snapshot

Finally, if you'd like us to mail you a copy of the Chicago Home Buzz report quarterly just drop us a line 

Stay tuned for more....

Sunday, December 09, 2007

Sub Prime Bailout

As many of you have probably heard, the Federal government has implemented a policy which would give an estimated 1.2 million homeowners out there an extention on their 'teaser rate' loans which are scheduled to go up in the next 6 months.

These rates would be locked or up to five years pending a rebound in the economy and an improvement in the housing industry in general.

It is an interesting yet controversial move because some feel it is only a bandaid and that this may postpone the foreclosure situation until the next administration.

Time will tell.

Here is an article from Inman news on the topic:

Administration, lenders defend rate freeze plan


Backers say up to 1.2 million loans eligible for refis, workouts
Thursday, December 06, 2007

By Matt Carter
Inman News

A plan to refinance or freeze the interest rates on up to 1.2 million subprime adjustable-rate mortgages for five years is not a "silver bullet" solution for all homeowners, but will help reduce the impact of the housing downturn on the economy and communities affected by foreclosures, Treasury Secretary Henry Paulson said Thursday.

Paulson was the point man as the Bush administration rolled out a much-anticipated agreement with mortgage lenders and loan servicers in the face of criticism not only from consumer advocates -- some say it won't help enough borrowers -- but warnings from some in the lending industry who said an interest rate freeze could discourage investors from financing future loans.

The agreement has the backing of the American Securitization Forum, which represents companies that issue mortgage backed securities, as well as investors, loan servicers and rating agencies. ASF Executive Director George Miller said the agreement provides a common framework to evaluate borrowers’ situations, and expedites processes for loan servicers to pursue refinancing and loan modification options on a more systematic basis.

The ASF today published a 34-page document outlining procedures for servicers to follow in streamlining refinancings or loan modifications on ARM loans that are scheduled to reset in the next 2 1/2 years.

Paulson said he hoped that the guidelines would be adopted as "customary standard practice across the entire servicing industry," because the current system would "not be sufficient" to handle the 1.8 million owner-occupied subprime ARM resets expected in 2008 and 2009.

According to the framework, loans eligible for streamlined refinancing or modification such as an interest rate freeze must be ARM loans on owner-occupied homes originated between Jan. 1, 2005 and July 31, 2007, with an initial interest rate reset between Jan. 1, 2008 and July 31, 2010.

Under the guidelines, only borrowers with FICO scores less than 660 and facing an increase in monthly payments greater than 10 percent will be eligible for fast-track loan modifications. Borrowers who don't meet the "FICO test" may qualify for loan modifications after individual reviews of their current income and debt obligations.

Although the Bush administration says up to 1.2 million ARM loans may be eligible for refinancing or modifications, the Center for Responsible Lending, estimated that a much smaller number of families -- perhaps 145,000 -- will actually see any relief.

The administration's estimate is based on the belief that nearly two-thirds of the 1.8 million homeowners with subprime ARM loans facing interest rate resets in the next two years can afford their introductory rate, but won’t be able to afford higher payments after their loans reset.

But many subprime borrowers have second, "piggyback" mortgages that pose obstacles to loan modifications, CRL warned, and loan servicers will still have financial incentives to foreclose on loans, rather than engage in workouts.

"The plan relies on voluntary decisions by individual mortgage servicers and investors, (and) does not remove the strong financial and legal incentives servicers have to foreclose on loans rather than modify them," CRL said in a statement. "Recent experience shows that the likelihood of widespread modifications is small under this 'business as usual' approach."

CRL said Congress should also allow bankruptcy judges to modify the terms of mortgage loans for borrowers who file for Chapter 13 bankruptcy protection, saying it could prevent up to 600,000 foreclosures. The lending industry opposes pending legislation that would change the bankruptcy code to do just that, saying it would raise the cost of borrowing (see Inman News story).

The rating agency Standard & Poor's issued a report raising concerns that wholesale interest rate freezes on subprime ARM loans could force it to lower its ratings on subprime mortgage-backed securities (MBS). Such concerns have prompted others in the industry to warn that wholesale loan workouts will discourage investment in MBS, worsening the ongoing credit crunch.

Paulson said the plan, while not perfect, is part of a broader effort the Bush administration has undertaken to address the housing downturn. Those efforts are in two areas, he said: limiting the impacts of the current downturn, and taking steps to protect housing and credit markets in the future by tightening regulations.

To limit the impact of the current downturn, the administration's FHASecure program allows some homeowners who are already in default to refinance into loans guaranteed by the Federal Housing Administration (FHA). HUD Secretary Alphonso Jackson said today that FHA has received 118,000 refinance applications since the program was announced in September, and that 35,000 homeowners have already refinanced into FHA-backed loans.

Jackson said FHA expects to process another 50,000 refinance loans by the end of the year, and that a pending bill to lower FHA down payment requirements, allow it to insure larger mortgages, and expand "risk-based" pricing, would allow FHA to back an additional 250,000 loans by the end of 2008. All told, Jackson said, FHA may be able to guarantee up to 800,000 loans in fiscal year 2008.

On the regulatory front, President Bush said at a press conference today that the Federal Reserve will announce stronger lending standards later this month. HUD and federal banking regulators, Bush said, are taking steps to improve disclosure requirements.

Bush chastised Congress for failing to pass an FHA modernization bill or legislation to reform oversight of the government-sponsored enterprises Freddie Mac and Fannie Mae.

Paulson and James Lockhart, director of the Office of Federal Housing Enterprise Oversight (OFHEO), echoed the president's call for a GSE modernization bill.

Lockhart said Fannie Mae and Freddie Mac "have played an extremely important role in supporting the mortgage market as all the problems erupted this summer," growing their market share of all new mortgages to more than 60 percent, up from 38 percent last year.

Although the House passed a GSE reform bill in May, there is disagreement in the Senate over limits on Fannie and Freddie's loan portfolios and whether to raise the $417,000 conforming loan limit.

Wednesday, December 05, 2007

FNMA Sells $7 Billion in Stock

Fannie Mae, the country's largest buyer of mortgages on the secondary market decided the risks to continue with the housing market decline put too much pressure on their return for investors and sold its preferred stock to raise capital.

The news cannot be greated with a reflection of optimism for the state of affairs for Fannie Mae and their involvement in the secondary market.

Just another sign that even FNMA bit off more than it could chew and is trying to create stability for its investors in this turbulent market.

This from Inman News

Mortgage repurchaser Fannie Mae said Tuesday it would issue $7 billion in preferred stock to raise capital and reduce the company's quarterly common stock dividend beginning in the first quarter of 2008.

Fannie Mae on Nov. 9 reported $1.4 billion in third-quarter losses, but said it had $41.7 billion in core capital on hand, $2.3 billion above minimum requirements set by the Office of Federal Housing Enterprise Oversight (OFHEO).

In a press release Tuesday, Fannie Mae officials said the preferred stock issue -- along with a smaller $500 million issue last month -- will help the company maintain a solid capital position through 2008.

The additional capital will "strengthen Fannie Mae's ability to manage the effects of ongoing volatility in the mortgage credit markets, continue to grow its securitization activities, and pursue attractive investment opportunities," the company said.

But Fannie Mae officials warned that worsening housing and credit markets, continued losses on guaranty contracts, substantial credit-related expenses, and losses on derivatives and securities “will adversely affect in a material way the company's fourth quarter 2007 results.”

In addition, the company said, conditions in the housing and credit markets, including expected further declines in home prices, “will negatively affect the company's financial condition, and results of operations in 2008.

Friday, November 16, 2007

Chicago Spire Gets $2.2 Billion Loan

Chicago's much talked about controversial spire highrise slid in under the press radar and was granted the $2.2 billion loan this week for the 115-story residential tower located at 400 E. North Water Street in downtown Chicago's Streeterville neighborhood. The project is scheduled to begin September 2008.

Thursday, November 15, 2007

Bush against Anti-Predatory Bill

The Bush administration has come out strongly against the anti-predatory lending bill being introduced by Congress. Their biggest objections are the limitations being imposed on lenders premiums, the bills attempt to prohibit penalties on subprime loans (the biggest focus on the national spotlight these days) and a very controversial measure which would create a limited liability of the companies buying loans on the secondary market.

This measure would in effect get the security backed mortgages a huge insurance against default--switching the liability from those Wall Street companies.

The adminstration was quoted in Inman News as having said they are against the provisions that "could overly constrict the primary and secondary markets for mortgage finance" include the bill’s specific underwriting standards, assignee liability provisions, and subjective obligations for mortgage originators."

Thursday, November 01, 2007

Worst Quarter Since 1994

This article was written by Chicago Crain's columnist Alby Gallun. The state of affairs in the residential real estate market has not seen such a significant slow down in this quarter since 1994.

By Alby Gallun
Oct. 29, 2007

Local homebuilders endured more pain and suffering in the third quarter as new-home sales continued a slide that began two years ago.

Residential developers in the Chicago area sold 3,796 homes in the quarter, down 34% from the year-earlier period, according to Schaumburg-based Tracy Cross & Associates Inc. On a seasonally adjusted, annualized basis, sales totaled 15,296 units, down 40% from last year and their lowest level since 1994.

"It's the same old story," says Tracy Cross, president of the real estate consulting firm. "I think we are at the bottom right now. How long it stays in this trough, I'm not so sure."

After a prolonged boom fueled by easy credit and speculative buying, the residential market faltered in 2005 as rising prices and mortgage rates curtailed demand for new homes. More recently, lenders have tightened their loan criteria amid the subprime lending crisis.

The downturn has rippled through the industry, forcing widespread layoffs at homebuilders and subcontractors.

"On our end, it's terrible. It's awful," says Jim Venhuizen, owner and president of Cimarron Construction Inc., a New Lenox-based carpentry contractor that serves the residential market.

Cimarron employs about 25 carpenters now, down from roughly 100 a couple of years ago. Though the firm is still profitable, its net profit margin has shrunk to the low single digits, well below the 10% that is the norm for the carpentry industry, he says. Work is scarce, and homebuilders that do have work for firms like Cimarron are demanding price cuts.

"Everybody's going to be working real cheap for the next year, for sure," Mr. Venhuizen says.

Another apparent victim of the downturn in the new-home market is Neumann Homes Inc., which last week said it plans to file for Chapter 11 bankruptcy protection (, Oct. 22).

The Warrenville-based homebuilder, which had 15 subdivisions in the works in Illinois, has laid off most of its employees and closed all of its sales, production and customer service offices.

The new-home business is especially bad in the suburbs, where sales fell 42% in the quarter, to 2,502 units, according to Tracy Cross. Sales in the city fell 14%, to 1,294 units.

A growing number of people who signed contracts to buy new homes are canceling, either because they can no longer qualify for a mortgage or they simply don't want to buy anymore, Mr. Cross says. The average cancellation rate is about 30% now, up from the more typical 15% to 20%, he estimates.

"Some are walking away from earnest money," he says. "Others are coming up with creative ways to get out."

The average Chicago-area new home sold for $416,329 in the third quarter, up 16% from the second quarter. But that number reflects a shift in the sales mix toward expensive condominiums in the city rather than any broader pickup in the market.

Though the downturn is deeper and longer than most observers expected, sales are so low that they can't drop much further, Mr. Cross says. Only 77 of the 817 condo and townhouse developments the firm tracks had eight or more sales during the quarter, and 327 either logged no sales at all or suffered a net loss of sales as buyers canceled contracts.

Wednesday, October 24, 2007

Cook County Taxes Due December 3

The County has released the new tax due date for the county taxes FY2006 are due December 1, 2007. Since that day is a Saturday they will be actually due that Monday, December 3.

That is the latest date ever recorded due in part to the budget deficits and disputes with the county board. The board budget was recenlty approved which allowed Pappas to begin the issuance of the tax bills.

Rumor has it that 2/3 of the city proeprty taxes will go down (a whopping $100 on average--whippdeedoo) and then will "adjust up" the following year.

Friday, August 31, 2007

Twin Assault

Twin Assault

U.S. President George W. Bush will outline reforms on Friday to help struggling subprime mortgage borrowers, and his central bank chief will deliver a speech which will be pored over for hints of a looming rate cut.

Federal Reserve Chairman Ben Bernanke speaks on "Housing and Monetary Policy" at around 10:00 a.m EDT.

Bush, who will make a statement at the White House an hour later, will announce assistance for homeowners with subprime mortgages to avoid default via changes to the tax code.

"He will also discuss reform efforts to prevent these kinds of problems from arising in the future," a senior U.S. administration official said.

Massive problems with U.S. home loans, stemming from aggressive lending mainly to poor people who have been squeezed as interest rates climbed, have fostered a liquidity crisis around the globe as banks have scrambled to calculate their exposure to the sector.

The risk of a credit squeeze arising from mass mortgage defaults has also raised the prospect of U.S. consumers trimming spending at a rate that could tip the world's largest economy into recession.

Investors have been pinning their hopes on an interest rate cut by the Fed, at its next meeting on September 18, to shore up the U.S. economy and stop the sickness spreading.

Bernanke reiterated on Wednesday the Fed was "prepared to act as needed" to ensure credit market problems do not adversely affect the economy, fuelling speculation the central bank will lower its benchmark federal funds rate from 5.25 percent.

But experts have said the Fed is in no rush to act as it wants to disabuse investors of the idea that it is there to bail out their poor decisions.

European shares rose as investor hopes mounted for dual action from the Fed and the U.S. government. U.S. stock futures pointed to a leap when Wall Street opens.

"It's comforting to investors that Bush and the administration are recognizing that there's a problem, but I still think the subprime mortgage problem is just going to get worse," said Benjamin Halliburton, managing director at Tradition Capital Management in Summit, New Jersey.

"I do think the market is going to have another panic down if Bernanke doesn't signal he'll cut rates in September."

Bush will press for legislation giving state agency the Federal Housing Administration flexibility to help subprime borrowers, including the power to guarantee loans for people at least 90 days behind in mortgage payments to help them avoid foreclosure, the Wall Street Journal reported.


Japanese Finance Minister Fukushiro Nukaga said he had been told by U.S. Treasury Secretary Henry Paulson global economic fundamentals were strong, but that it may take some time for adjustments in markets to take place.

International Monetary Fund First Deputy Managing Director John Lipsky said market turmoil would dent but not derail world growth, but that it was too soon to declare the troubles over.

"Central bank action so far has been appropriate but market turbulence has not fully receded," Lipsky told Reuters on the sidelines of a gathering of central bankers and economists in Jackson Hole, Wyoming.

It is there that Bernanke will speak later.

There were plenty of signs the crisis was far from over.

Rates for three-month sterling hit their highest in 8-1/2 years and rates for other currencies also surged, reflecting persistently strong demand for cash from financial institutions.

Australia's central bank struggled to ease upward pressure on some market interest rates as renewed trouble in the global commercial paper market made institutions reluctant to lend.

Deutsche Bank (DBKGn.DE: Quote, Profile, Research) has shut down its London proprietary credit trading desk and is laying off some of the team, a source familiar with the matter said.

Earlier this month a source close to the bank said Deutsche was set to ditch its credit relative-value trading strategy -- used by the London desk -- after losses of about $135 million.

Deutsche Bank declined to comment. It has said nothing so far about any losses stemming from credit market tremors.

Britain's Barclays Plc (BARC.L: Quote, Profile, Research), meanwhile, turned to the Bank of England as the lender of last resort for the second time this month after at technical breakdown in the British clearing system, a source close to the matter said.

Barclays declined to confirm it had used the borrowing facility but said in a statement it was "flush with liquidity".

Mike Peacock

LONDON (Reuters)

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Friday, August 17, 2007

Free Chicago MLS Property Search Services

Here is a link to the newest MLS map search service I offer all of my clients and non-clients. Its a fast and effective search tool which allows you to enter your search parameters, drag a box over the area you are looking at and at the click of a button all the properties in that search area are shown including a scroll over feature where the picture and short info (price, bedrooms, baths, picture) pops up. Then click on that to get more info on that property.

Just one more way I am helping bring the latest tools in the industry to each of my clients (or future clients). Email login is required but that is the limit to the obligation you have to my company.

Enjoy and as always feel free to call me when you are ready to start making appointments to start seeing some of these properties in person. I will include my neighborhood market analysis and review all of my buyer services.

Wednesday, August 15, 2007

Market Pressure Cooker Good ?

This article written on site is interesting and while the general gist of the article is a bit slanted towards polyanna (the market jitters from last week and the US Fed $37 billion cash infusion is good for the market) doesn't really address the fact that this could be a major negative for the real estate market....I at least do agree that this will thin the heard of buyers and bring only the best qualifying buyers to the table/ At least I'd like to think so.

I like when the market puts pressure on the industry as a whole and weeds out the trouble spots like buyers who shouldn't be buying or realtors who shouldn't be selling...

What do you think??

Who can't get a mortgage now

Buyers with good credit and a down payment will make out well - all others, prepare to pay.

By Steve Hargreaves, staff writer

August 11 2007: 3:15 PM EDT

NEW YORK ( -- The stock market is going crazy. Hedge funds are going under. But for the average American looking for a home loan, the crisis in the subprime mortgage market may actually be good news.

"Not only is it nothing to worry about, it's an absolute positive," said Loni Graiver, president of the Maine-based Cumberland County Mortgage. "Not only have [home] valuations come down, but [interest rates] are still historically low."

Rates on 30-year fixed loans dipped last week, to 6.41 percent, according to the Mortgage Banker's Association.

In addition, tightened lending standards stemming from the subprime crisis likely mean fewer buyers, pushing down home prices.

The one catch is this: You've got to be a buyer with good credit, a low debt to income ratio, a healthy down payment, verifiable income, and looking to finance less than $417,000 (the cutoff for so-called jumbo loans).

Those characteristics basically define someone who qualifies for a loan through a government program like Fannie Mae, which makes up about 50 percent of all outstanding mortgages, according to Guy Cecala, publisher of the industry newsletter Inside Mortgage Finance.

Graiver said to expect to pay a down payment of at least 10 percent, and have a FICO credit score of 620 or higher in order to get a rate between 6.2 and 7.5 percent. Perhaps 90 percent of home buyers qualify for that prime rate, although if you want a rate below 7 percent you probably need a FICO score above 660.

To get the best deal, "plan on coming to my office with your tax returns and a down payment," said Bob Mouton, President of the Long Island-based American Mortgage Group.

If you're among the 10 percent of people with credit scores below 620 who need a subprime mortgage, things could get tricky.

"To a large extent, they are going to find that no one wants to lend to them," said Steve Habetz, president of Threshold Mortgage in Westport, Conn. "Those loans are being eliminated from the marketplace."

Someone with a credit score of 600 might have to pay as much as 9.5 percent, according to FICO, which provides lenders with borrowers' credit ratings.

You could also run into trouble if your loan is for more than $417,00, the maximum amount that can be channeled through a government lender. Loans over $417,000 are considered "jumbo" mortgages, which have recently seen rates jump due to a perceived increase in risk.

Mouton said money for subprime loans is still there, but be prepared to pay interest rates of 8 or 9 percent on them, compared to just over 7 up until recently.

Eugene Choi and Rich Bouchner, owners of Commodore Mortgage Group, say they've had to scramble to get loans for clients in the New York area that didn't meet the traditional criteria.

One was a waitress who made decent money at a high end restaurant, but couldn't prove it because so much of her pay was in cash tips.

Another was a young lawyer, making nearly $200,000 in the city but who didn't have the money saved for the down payment on a $800,000 Manhattan condo.

"A lot of people who should have qualified for credit are getting squeezed out of the market," said Bouchner. "Our lenders are turning off the spigot so quickly, these loans might not be here tomorrow."

Sunday, August 12, 2007

Join Me on My Map

Welcome to my map.

When you visit the site just for kicks, add a picture and where you live/work and together we can grow this puppy all over the world.

Pretty cool....

Thursday, August 09, 2007

Non-Referendum Increase in Transfer Taxes Proposed

The Illinois legislature is still preparing to vote on an increase to the transfer tax to pay for mass transit. For the average police officer, firefighter, health care worker and teacher this increase would be over $900 on the average priced home. This will delay some in purchasing a home and will contribute to slowing down the market.. This bill would also authorize the Chicago City Council to increase its real estate transfer tax (currently $7.50 per $1,000 paid by the buyer) WITHOUT A REFERENDUM but merely by passage of an ordinance. The ordinance for the "supplemental" real estate transfer tax increase of up to $3 per $1,000 would be for the sole purpose of providing financial assistance to the CTA for funds for debt service for the pension bond. The city would have to enter into an intergovernmental agreement with the CTA-the term of the intergovernmental agreement is to be "for a term expiring no earlier than the final maturity of bonds or notes that it proposes to issue" for pension bonds - stated to be the year 2039!

An increase of $3 per $1,000 represents a whopping 40% TAX INCREASE in the City's real estate transfer tax imposed on the city's property owners.

Chicago REALTORS® have long understood the linkage between transportation policy and housing. Chicago REALTORS® want to build Chicago and make it stronger. Chicago REALTORS® work to encourage people to live, work and play in Chicago. We oppose all Real Estate Transfer Tax increases that inhibit this City's growth.

AT 312-744-3300


Tuesday, August 07, 2007

Some Available Foreclosures in Chicago

Here is a list of recent foreclosure properties in COOK COUNTY

07/17/07 07CH0018808 Mutual Bank vs. Nicholas Mitchell, 1050 E Oakton St, Des Plaines, Commercial Property, $2,206,900
07/17/07 07CH0018815 Hinsdale Bank & Trust Co vs. Rosewell Dev Llc Na, 6254 N Rockwell St, Chicago, Apartment Building, $2,187,473
07/16/07 07CH0018668 Wells Fargo Bank vs. Chicago H&s Hotel Property Llc Na, 71 E Wacker Dr, Chicago, Commercial Property, $100,785,289
07/24/07 07CH0019407 State Bank Of Countryside vs. Richard Zerth, 12301 S Hobart St, Palos Park, Single Family Residence, $2,006,656
07/24/07 07CH0019408 State Bank Of Countryside vs. Donald E Zerth, 18201 Harper St, Lansing, Single Family Residence, $2,006,656
07/24/07 07CH0019409 State Bank Of Countryside vs. Barbara T Zerth, 14416 S Harrison Ave, Posen, Apartment Building, $2,006,656
07/24/07 07CH0019428 Charter One Bank Na vs. Dharam Vir, 2 E Rand Rd, Mount Prospect, Commercial Property, $2,025,971

Let me know if you are interested in more information on these properties and I will get them to you...or visit my website at

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Monday, July 30, 2007

City Budget Taking Hit From Slowing Housing Market

The slumping housing market is going to hamper Chicago's economy over the next several months, despite a strong job market and increased spending by area businesses.

The local economy is projected to grow at 2.7% in the second half, according to Moody's Inc., little changed from the first six months of 2007 as the fallout from mortgage defaults and declining home sales stymie consumer spending.

"We have yet to see the full impact of the housing decline penetrating through the economy," says Geoffrey Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign. "This doesn't mean we are going down — we are just not going to be growing as rapidly as we have in the past."

For the year, the local economy is expected to expand 2.3%, down from 3.2% in 2006. Economists predict modest growth over the next two years.

Chicago-area home sales and construction have fallen over the last year due to an explosion of defaults on loans to customers with tarnished credit, foreclosures and tighter mortgage lending standards. Combined with more than $3-a-gallon gas prices, consumers are expected to hold back on spending in the second half, economists predict.

"I've been in housing for over 30 years. I've never seen it go this long and this steep at any point in my career," says Tracy Cross, president of Schaumburg-based real estate consultancy Tracy Cross & Associates Inc. "Modest signs of recovery may show itself in 2008."


Total home sales in Chicago fell 19.8% in June from the year-earlier period, according to the Illinois Assn. of Realtors. Local homebuilding dropped 37% in the second quarter from a year earlier, the worst showing since 1994, figures from Tracy Cross & Associates show.

The housing troubles aren't hurting manufacturers that cater to commercial and industrial customers, says Don McNeeley, president of Chicago Tube & Iron Co. in Romeoville.

Mr. McNeeley is hiring thanks to strong demand. He says orders are up over last year and he plans to add up to 30 workers in the next 12 months, bringing his staff to about 530.

Chicago Tube & Iron built a $22-million plant in Romeoville in 2005 and plans to open two other facilities in Wisconsin and North Carolina.

In addition to manufacturing, there also will be hiring and overall growth in tourism and financial and professional services, says Sophia Koropeckyj of Pennsylvania-based

For some business owners, the question isn't whether they'll add jobs but whether they can find qualified employees.

"The marketplace right now is challenging," says Todd Black, a Naperville-based regional vice-president for Arkansas-based technology consulting firm Technisource Inc.

The firm is recruiting on college campuses and turning to current employees to help find as many as 12 people in the Chicago area this year.


Overall, Chicago-area companies added 44,100 jobs in May, after creating 41,000 the previous month. The unemployment rate in the Chicago area is 5.3% as of June, which is higher than the national average of 4.5%. Still, some local businesses are having a difficult time finding the talent they need to keep up with orders and expansion plans.

Mark O'Malley, president of Chicago-based packaging company Paket Corp., wants to hire 16 mechanics in the next six months after sales rose 17% in the first half of the year. (He wouldn't disclose sales.) But he's wary of bidding on big contracts.

"I'm concerned that we can't fulfill them in a timely fashion," Mr. O'Malley says.

With rising demand from industrial, food, health and beauty products companies, Mr. O'Malley also is spending to invest in new equipment and technologies.


Business spending, which was tepid during the first part of the year as companies let inventories run down, is propping up the economy in the second half of this year as consumers curtail their purchases.

"Business (investment) is going to be absolutely critical going forward," says the University of Illinois' Mr. Hewings.

Overall consumer spending makes up about two-thirds of economic growth and had been a mainstay for the economy until the end of the first quarter.

But the outlook at retailers like Hoffman Estates' Sears Holdings Corp. isn't good: Sears warned this month that profit will decline in the second half as sales fall.

The outlook has small businesses anxious as well.

Tiffany Bullock, who recently opened her South Loop shoe boutique House of Sole in May, says she's had a slow start and is keeping a close eye on inventory.

"I'm still in a break-even cash-flow situation," Ms. Bullock says. "I'm nervous because I'm the new kid on the block."

July 30, 2007

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Conversion Property Sales Up (but stats are deceiving)

2 major deals drive first-half jump in apartment sales

(Crain’s) — Sales of apartment buildings in the Chicago region soared almost 70% in the first half of the year to $1.45 billion, buoyed by two massive downtown transactions and rent growth that continues to fuel demand from institutional investors.

Sales in the city through June totaled $944.25 million, almost triple the amount from the same period last year, while sales volume in the suburbs fell 4.9% to $502.59 million, according to a new report by CB Richard Ellis Inc.

With another $750 million of deals in the works, sales could climb to $2.5 billion this year, predicts John Jaeger, first vice-president with CB Richard Ellis’ multi-family investment unit in Chicago. That would shatter the all-time high of $1.89 billion reached in 2005.

“I think $2.5 billion is achievable. It’s not a stretch,” Mr. Jaeger says. “You’re seeing mega-deals as well as large and mid-sized transactions.”

Two downtown deals accounted for more than 50% of the volume in the first half of the year: the 2,346-unit Presidential Towers, which was bought for $475 million by Chicago-based Waterton Associates LLC, and the 481-unit Grand Plaza east tower, which a foreign investor bought for $263 million.

Institutional investors such as pension funds and private-equity firms are dominating the landscape, as condominium converters have been almost non-existent.

Through June, not one apartment downtown was bought by a converter, a developer that would convert the building into condos. One such deal was put under contract, though: American Invsco’s agreement to buy a 46-story tower at 200 N. Dearborn St.

The Chicago region has become popular with institutional investors trying to find so-called value-add properties where renovations can lead to big rent increases. That’s because much of the apartment stock here consists of 20- to 30-year-old complexes, says Mr. Jaeger, and because few new apartments have been built in recent years.

“Value-add deals continue to be the buzz as investors are chasing higher yields through a renovation program and resulting rent premiums,” the CB Richard Ellis report says.

One value-add investor concedes that deals have been hard to come by.

“It’s a challenge to successfully win those opportunities in this environment when so much capital is seeking value-add properties,” says Bennett Neuman, a senior vice-president of acquisitions with Chicago-based Laramar Group.

But Mr. Neuman says Laramar, which last bought a property here late last year, is hopeful about some current prospects.

“We’re seeing good increases in market rents, and vacancies are declining,” he says. “In general, we have the wind at our back.”

From Crain's Chicago Business

Related story: Thompson to resign as Winston & Strawn chair

Related story: Over the past 11½ years, condo converters have accounted for 43% of apartment sales in the city, according to CB Richard Ellis.

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Friday, July 27, 2007

Michigan Avenue Development Dead

Citing worries about the slumping downtown condominium market, Miami developer Peebles Corp. has walked away from a prime Michigan Avenue site where it had planned to build a 50-story condo and hotel tower.
Peebles had signed a contract this spring to pay about $32 million for the site at 300 N. Michigan Ave., currently home to a Walgreens, a Subway and a Radio Shack (Crain's, April 14).

But the developer "felt a bit uncomfortable" with the weak high-end condo market and decided to back out a couple of weeks ago, says Barron Channer, Peebles' vice-president of development.

"We're not moving forward with it, but we're still looking aggressively in the market," he says. "We want to do something that's more in scale with where we think the market is."

from Crain's Chicago Business

Average, Not Speculative, Buyers Moving Market

The stories are similar across the country. More homes for sale and fewer people buying. The National Association of Realtors reports sales of existing homes fell for the fourth straight month.

David Hanna is the treasurer for the Chicago Association of Realtors.

"Overall, the market has just gotten back to a pace where it's more about the average person going out and buying a home, and that's what's driving our market today versus the investment activity that we were seeing before," said Hanna.

The American dream of buying a home isn't as easy as in some Chicago communities. Geoff Smith is the research director for the Woodstock Institute where they track financial services in Chicago's minority communities. He says foreclosures have gone up 50 percent since last year and he says that only makes it harder for low income families trying to buy or keep a home.

"It's going to be more difficult for borrowers who are having problems with their mortgage to refinance their loan because credit terms are going to be more restrictive. It's going to be more difficult for them to sell their homes because there is a much larger supply of homes on the market," said Smith.

In addition to sub-prime lenders aggressively marketing their mortgages to those who couldn't afford them, sometimes a job cutback or illness may put homeowners behind in payments. If that happens, housing experts recommend calling the lender immediately to work out some arrangement to change terms or work out a way to get up to date.

Monday, June 25, 2007

May home sales in Chicago down almost 21%

Home sales in the Chicago area plummeted 20.7% last month compared with May 2006, according to the Illinois Assn. of Realtors.

A total of 9,750 single-family homes and condominiums were sold in the nine-county Chicago area last month, with the median home price rising 1.2% from the year-earlier period to $252,388. The biggest drop in sales last month occurred in outlying DeKalb, Grundy and McHenry counties. Sales in Cook County fell 20.1%.

Through May, sales in the nine-county area were down 17.4% from last year to 38,423, according to the association.

The home-sales figures were more grim nationwide.

Sales of existing homes fell in May to the lowest level in four years while the median home price dropped for a record 10th consecutive month.

The National Assn. of Realtors reported that sales of existing single-family homes and condominiums dropped by 0.3% to 5.99 million in May, the slowest sales pace since June of 2003.

The median price of a home sold last month dropped to $223,700, down 2.1% from a year ago. It marked the 10th straight price decline compared with a year ago, the longest stretch of weakness on record.

The sales decline reflected weakness in the South, where sales dropped by 3.4%, and the West, where sales were down by 0.8%. Sales actually showed strength in the Northeast, rising by 5.8%, and the Midwest, where they were up 0.7%. In a troubling sign for the future, the inventory of unsold homes rose by 5% to 4.43 million units in May, a level that would take 8.9 months to clear out at the May sales pace. That is the highest inventory level since the last deep slump in housing in 1992.

Analysts said housing is being hurt by high inventories and the recent crisis in subprime mortgages, which has caused lenders to tighten their standards, making it harder for potential buyers to qualify for loans.

They said all of the housing troubles seem to be causing a crisis in confidence, making people delay decisions to buy homes.

"I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers," said Lawrence Yun, senior economist with the Realtors.

The current slump in housing is the worst since the 1989-92 downturn. It is occurring after a prolonged boom that saw sales of new and existing homes set new records for five consecutive years.

Analysts believe that the median home price, the midpoint where half the homes sold for more and half for less, will continue falling until builders move further to cut back on production of new homes coming on the market.

The Realtors are predicting that the median home price will decline by 1.3% this year while sales are forecast to drop by 4.6%. It would be the first annual price decline in four decades of record-keeping.

Another potential problem is mortgage rates, which have been trending higher in recent weeks although they still remain below their historical averages.

According to Freddie Mac, the average commitment rate for 30-year mortgages was 6.26% in May, up from 6.18% in April.

(From AP, staff)

Mega South Loop Development

3,000 housing units, hotel on drawing board for vacant riverside site

Two Chicago developers aim to build as many as 3,000 homes, a hotel, stores and a marina along the Chicago River just south of downtown, transforming an 8-acre tract that has sat empty for 36 years into a densely packed urban neighborhood.

Estimated to cost $1.6 billion, the 3.5-million-square-foot project four blocks south of the Sears Tower would mark a big step forward in the South Loop's residential renaissance and bring life to a dead stretch of the Chicago River. Sources say the developers, Rokas International Inc. and Frankel & Giles, have agreed to pay about $55 million for the parcel, which, like Block 37 in the central Loop, has stubbornly resisted development.

"That site is a gaping hole," says architect Dirk Lohan of Chicago-based Lohan Anderson, who did planning work there in the early 1990s.

The question is whether Rokas and Frankel & Giles can succeed where others have failed. It's unclear whether the city will grant them the zoning change they need to build such a dense project, which would jam into the site about a million square feet more than current zoning allows. The developers, who decline to comment, also plan to ask the city for about $25 million in tax-increment financing to help pay for a riverwalk and other infrastructure, a source says.

Another challenge: the slumping condo market, which could make financing the development difficult.

Designed by Adrian Smith & Gordon Gill Architecture, the project would include as many as eight buildings — one exceeding 80 stories — and about 125,000 square feet of retail space. The residential component would be a mix of condos, apartments and senior housing. A hotel, with as many as 500 rooms, and a 40-slip marina would round out the complex.

With its riverside location and proximity to downtown and public transit, "it's a great piece of real estate," says Peter Dumon, president of Harp Group Inc., an Oakbrook Terrace-based development firm that has reviewed the latest proposal for the property.

Yet he declined an offer to develop the hotel in the project, noting that hotel guests are unlikely to venture south of the Congress Expressway. Harp instead is considering buying development rights for an apartment tower on the site.

Known as Franklin Point, the property is the former site of Grand Central Station, a rail terminal demolished in 1971. The developers have signed contracts to buy the tract from Jacksonville, Fla.-based railroad company CSX Corp., which owns 6 acres of the site, and D2 Realty Services Inc., which owns about 2 acres. CSX did not return calls. David Kleiman, a D2 principal, declined to discuss terms.


The developers are negotiating with city officials over rezoning the property and will also need support from neighborhood groups and Alderman Bob Fioretti (2nd).

Then there's the challenge of selling enough condos to land a loan for the project. The condo glut could ease by then, but the supply of unsold units downtown reached 6,507 at the end of the first quarter, up 62% from a year earlier, according to Chicago-based consultancy Appraisal Research Counselors.

Founded in 2000 by Lithuanian immigrant Andrius Augunas, Rokas has developed several smaller condominium projects in the South Loop but nothing on the scale of Franklin Point. Frankel & Giles, which also specializes in the South Loop, has a longer résumé, including a 274-unit condo tower at Prairie Avenue and 18th Street.

If it comes to fruition, the Franklin Point project would anchor and enliven the western edge of the South Loop, where residential development has been slow to take off. D2 Realty proposed a less-dense project there than the current proposal but dropped the plan about two years ago amid an impasse in talks with the city. In the early 1990s, Harris Bancorp Inc. scratched plans to build a back-office building on the site.

"It's kind of like Block 37," says Mr. Kleiman, referring to the central Loop parcel that is finally being developed after a 15-year delay. "Hopefully, this will be the time."

©2007 by Crain Communications Inc.

Friday, June 15, 2007

Rates Up Again: Brutal Week

The Mortgage Bankers Association's seasonally adjusted index of home-loan application activity rose 6.6 percent to 666.5 for the week ended June 8. The index of purchase activity advanced 7.2 percent, while refinancing activity bumped up 5.6 percent.

Meanwhile, mortgage rates climbed to an 11-month high, with the average 30-year fixed mortgage rate hitting a 10-month high of 6.84 percent, according to's weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.27 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing increased by a similar amount, to 6.53 percent. Adjustable rate mortgages were no different, with the average one-year ARM nosing higher to 6.19 percent and the 5/1 ARM bounding up to 6.67 percent.

Mortgage rates staged a significant increase over the past week, and it came in the absence of any major economic data. Instead, rising interest rates overseas proved to be the catalyst, even though the Federal Reserve stands pat here at home, Bankrate said. Higher interest rates and strong economic growth in other parts of the world could force Uncle Sam to pay higher yields to attract funds from foreign investors.

Fixed mortgage rates have increased more than one-half percentage point since mid-May. At the time, the average 30-year fixed mortgage rate was 6.32 percent, meaning that a $165,000 loan would have carried a monthly payment of $1,023.46. With the average 30-year fixed rate now 6.84 percent, the same loan originated today would carry a monthly payment of $1,080.08.

Fixed mortgage rates still remain the better refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.

Source:, Mortgage Bankers Association

Bank-Owned Properties Drive Down Prices

Bank-owned real estate isn’t being discounted, insists Patrick Carey, the executive in charge of foreclosed properties at Wells Fargo & Co.’s real estate division.

"The impact on the neighborhood and the community is vital with us," Carey says. "We don't want to flood a community with below-market-priced homes and cause further deterioration."

But research suggests that if that’s true, it may be temporary. Owners are likely to discount their asking prices 20 percent or more in communities where foreclosed homes make up 8 percent or more of sales, according to the study by Christopher Cagan, an economist with title insurer First American Corp.

In 1995, at the depth of the region's last housing downturn, lender-owned homes accounted for 7 percent of all sales — and sold at an average discount of 15 percent, the study found.

Source: Los Angeles Times, Annette Haddad (06/08/07)

Foreclosure Properties Way Up

Foreclosures Hit 37-Year High
More home owners entered the foreclosure process during the first three months of 2007 than during the record-setting final quarter of 2006, according to a report by the Mortgage Bankers Association.

The MBA’s Chief Economist Doug Duncan predicts that delinquencies would continue to rise, peaking later this year. He also points out that the rate would have fallen if it weren’t for substantial increases in seven states.

"The percentage of loans in foreclosure would be well below the average of the last 10 years were it not for Ohio, Michigan, and Indiana," Duncan says. "And the rate of foreclosures started nationwide would have fallen were it not for the big jumps in California, Florida, Nevada, and Arizona. Those states have special circumstances that do not reflect what is happening in the rest of the country."

Seasonally adjusted, 0.58 percent of loans entered the foreclosure process last quarter, compared with 0.54 percent in the fourth quarter of 2006 and 0.41 percent in last year's first quarter. The rates for the past two quarters are the highest in the survey's 37-year history.

— REALTOR® Magazine Online and The Wall Street Journal, Damian Paletta and James R. Hagerty (06/15/07)

Monday, May 21, 2007

Uptown Theatre Rocks

After years of neglect, groups fighting over it

The historic Uptown Theatre, which has defied redevelopment attempts and slowed the resurgence of its neighborhood since closing in 1981, is suddenly a hot property.

Local concert promoter Jerry Mickelson and Block 37 developer Joseph Freed & Associates LLC are battling a group led by real estate investor David Husman over control of the foreclosed 1920s-era landmark, which also has attracted the attention of national concert promoters.

Mr. Mickelson, co-founder of Jam Productions Ltd., wants to restore the 4,500-seat theater, which once hosted Prince, the Grateful Dead and other big acts, as a concert venue. In a foreclosure sale, a buyer may have to pay upward of $3.5 million to satisfy the outstanding mortgages, liens and money the city is owed for repairs. Renovation would cost about $40 million.

The fight for control of the theater reflects the Uptown neighborhood's improving fortunes. That revival would gain momentum from a redevelopment of the cavernous 1925 movie palace, which sits prominently on Broadway, Uptown's main drag.

Click link for full story from Crain's Chicago Business

Friday, May 04, 2007

Rogers Park Condo Podcast

Looking for a two bedroom one bath newly remodelled TOP FLOOR close to transportation and park and near lake condo with in-unit laundry, hardwood floors throughout, stainless steel appliances and granite countertops place you can call home?


You found it (possibly).

Here is a podcast of that place we would like you to consider.

While you are on the internet why don't you check out the interior pictures here.

Floor plans? Go no further than here!

Contact me for a private showing of this place you can call home.

Saturday, April 28, 2007

Home sales fall even faster in 1st quarter

No bottom in sight as new-home slide accelerates

Dashing hopes that the housing slump would soon bottom out, new-home sales in the Chicago area fell even faster in the first quarter as the market meltdown spread from the suburbs to the city.

Residential developers in the Chicago area sold 5,341 homes in the quarter, down 35% from a year earlier and the weakest showing in more than 11 years, according to a report by Tracy Cross & Associates Inc., a Schaumburg-based real estate consulting firm. City sales, which held up better than the suburban market last year, plummeted to 1,170 units, a 44% drop from the year-earlier period and the lowest volume in 15 quarters.

"Everybody was waiting for spring," when buyers re-emerge, but "it just didn't come," says Tracy Cross, president of the firm. "This is definitely the steepest downturn we've seen" since the early 1980s.

Recession is rippling through the homebuilding industry, one of the area's biggest employers, with nearly 285,000 workers, from architects to carpenters. Contractors and developers have slashed payrolls and stopped building houses on "spec," meaning before finding a buyer. Many are cutting prices to goose demand, and the median sale price for single-family homes fell 1.7% to $299,470, the report shows.

Experts predicted the new-home market would hit bottom this spring after six straight quarters of falling sales. But recovery now appears further away, particularly in the city, where developers continue to build despite the precipitous drop in sales.

"We've seen continued softening in April," says Dan Star, Illinois division president for Dallas-based Centex Corp., which sold 1,150 homes in the Chicago area last year. "Traffic is down. Contracts are down. I think this will go on for another six months or year or longer."

Centex's local workforce is about half the size it was at the peak of the housing boom in 2005, when it employed "well over" 200 people, Mr. Star says. The company's Chicago-area sales in the most recent quarter were roughly flat, he says, declining to disclose specific sales or employment figures.

Demand started falling in 2005 as rising interest rates, combined with lofty prices, put homes out of reach for many buyers. Builders are likely feeling the after-effects of the ultra-low interest rates that drew large numbers of buyers into the market earlier in the decade but left little demand for later years. Mr. Cross estimates that as many as 7,000 local apartment renters a year became buyers during the boom, a number close to zero now.

Recent turmoil in the subprime lending market also may be crimping demand, as tighter lending standards make it harder for people to finance home purchases, Mr. Star says. Compounding those woes is the growing reluctance of consumers to buy homes in a declining market.

The first-quarter sales decline was the sharpest since the downturn began, according to Tracy Cross. On a seasonally adjusted annualized basis, sales slid to 18,927 units, down 26% from 22,226 in the previous quarter and 46% from the peak of 35,264 in second-quarter 2005.

As suburban sales tumbled last year, the city held up relatively well, logging its second-best year ever. That changed in the first quarter, when city sales fell 44% vs. 32% in the suburbs.

The supply of unsold condominiums in downtown high-rises under construction is growing even as demand is declining. Speculators — investors who buy condos to flip them for quick profit — fueled the boom but have all but disappeared from the market. And developers are likely to face stiff competition from the resale market, as thousands of owners of recently built condos put their units back up for sale, Mr. Cross says.

"You should see continued erosion in the city," he says.

The Chicago Home Buzz is already printed and mailed and the stats in our report shows a 35% reduction in sales compared to ehe previous quarter. For a copy of our CHB report email me!

©2007 by Crain Communications Inc

Saturday, April 07, 2007

Edison Park Single Family Home

This large, sunny Edison Park home has FIVE BEDROOMS (four upstairs) and THREE BATHROOMS. The main level includes separate living and dining rooms with an adjoining guest bedroom or office with a full bathroom. There is a large, sunny family room in the rear of this home which is located off of the HUGE updated, eat-in kitchen which includes new stainless steel appliances such as the Bosch dishwasher and new side-by-side refrigerator. See floor plans on other side or go online for more pictures.

Upstairs there are four bedrooms including the large master bedroom with its own private, full bathroom which includes ample closet storage as well as tall cathedral ceilings. There is a dual zoned furnace system and whole house fan for a more efficient heating and cooling system. The basement level includes a partially finished rec room with a full bath as well as an additional storage areas with walk-out stairs to the spacious side and rear yards. Also included is a new 2 1/2 car garage with additional storage room.

This home is just a few blocks from the Edison Park Metra stop and is conveniently located between downtown Edison Park and Park Ridge where you can enjoy all of the amenities of both towns including the restaurants, parks, schools including the Edison Regional Gifted Center ranked #1 in Illinois, block parties, festivals, the Pickwick Theatre, Starbuck’s coffee and the new Trader Joe’s coming soon.

Call me to schedule your private showing.

Visit this slideshow here

Friday, March 09, 2007

Heading in the Right Direction

Monthly Home Sales Reach 7-Month High

Sales of existing homes rose in January, reaching the highest level in seven months, according to the NATIONAL ASSOCIATION OF REALTORS®.

Total existing-home sales — including single family, townhomes, condominiums, and co-ops — increased 3 percent to a seasonally adjusted annual rate of 6.46 million units in January from an upwardly revised pace of 6.27 million in December. Sales were 4.3 percent below the 6.75 million-unit level in January 2006.

David Lereah, NAR’s chief economist, says observers shouldn’t overreact to the sales gain or to other short-term effects. “Although we’re expecting existing-home sales to gradually rise this year, and buyers are responding to the price correction, some unusually warm weather helped boost sales in January,” he says.
“On the flip side, the winter storms that disrupted so much of the country in February could negatively impact the housing market. “Although the data is seasonally adjusted, these weather events are unusually large — many transaction closings were postponed in February, and home shopping was essentially shut down for about a week in many areas,” he says. “We shouldn’t be surprised to see a near-term sales dip, but that will be followed by a continuing recovery in home sales.”

Inventories Drop

Total housing inventory levels rose 2.9 percent at the end of January to 3.55 million existing homes available for sale, which represents a 6.6-month supply at the current sales pace — unchanged from the revised December level. Supplies peaked at 7.4 months in October 2006.“Inventories are looking better, but price softness should continue until spring when the market is expected to become more balanced,” Lereah says.What Happened RegionallyHere’s a breakdown of home sales by region:

West Coast: Existing-home sales in the West rose 5.6 percent to an annual pace of 1.32 million in January but were 9.6 percent lower than a year ago. The median price in the West was $321,300, down 4.6 percent from January 2006.

Midwest: Existing-home sales increased 4.8 percent in January to a level of 1.53 million, and were 0.6 percent lower than January 2006. The median price in the Midwest was $162,600, which is 3.5 percent below a year ago.

South: Existing-home sales in the South rose 2 percent to an annual sales rate of 2.54 million in January, but were 7.3 percent below a year ago. The median price in the South was $174,600, which is 1.7 percent below January 2006.

Northeast: Existing-home sales in the Northeast were at a level of 1.07 million in January, unchanged from December, and were 5.9 percent higher than January 2006. The median existing-home price in the Northeast was $260,700, down 1.2 percent from a year earlier.

National Single-family and Condo Home Sales

Single-family home sales rose 3.5 percent to a seasonally adjusted annual rate of 5.69 million in January from an upwardly revised 5.50 million in December. But that still accounts for 4.2 percent below the 5.94 million-unit level in January 2006. The median existing single-family home price was $209,200 in January, down 3.5 percent from a year earlier.Existing condominium and cooperative housing sales slipped 0.1 percent to a seasonally adjusted annual rate of 767,000 units in January from a downwardly revised pace of 768,000 in December. Last month’s sales activity was 5.7 percent below the 813,000-unit pace in January 2006.The median existing condo price was $222,200 in January, up 0.5 percent from a year ago.

NAR President: Market is Stabilizing

The national median existing-home price for all housing types was $210,600 in January, down 3.1 percent from January 2006 when the median was $217,400. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Pat Vredevoogd Combs, from Grand Rapids, Mich., says a broader view shows the housing market stabilizing. “The market is trending up from its low last fall, and that is important in restoring confidence to buyers who’ve been on the sidelines,” Combs says. “Since buyers can find more favorable terms, and they are looking for a place to call home for some years to come, getting into the market now makes sense. It’s a choice many didn’t have during the boom period of bidding wars in much of the country.”

source— REALTOR® Magazine Online

Friday, March 02, 2007

Overextended Loans

So many loans in the past few years have been granted to what are called subprime or alt-a loans. Loans where people of not so solid or even worse, not so worthy credit are given loans at much higher rates overextending many people who have no business being in the financual risjky situation they were put in (or put themselves in).

These types of loans put not only those who took out the loans at risk, but the entire national real estate market.

If these loans start causing an increase in the already accelerated foreclosures we are seeing in some areas (including Illinois) then this trickle affect could create a spiral downward in the real estate industry.

Every financial reporter and news outlet has for a month been all over the demise of the subprime mortgage, the accent on foreclosures. In the mortgage market, everybody has been blaming everybody: it's only the 2006 originations, it's only the bad actors ... big guys stuffing faulty paper back down the throats of little guys until they fold, giant guys taking big losses (HSBC $10 billion so far), but not giant losses.

As of Friday there are not enough buyers of subprime risk to cover loans recently closed or in process. In panicky conditions, no buyers at any price. Subprime loans this week from time to time may be unobtainable until their rates move high enough and credit standards tighten enough. Trash, like other things, rolls downhill: Alt-A loans are closer to junk than trash, but high loan-to-value-ratio Alt-A loans are still trash. By next week there will be few buyers of Alt-A risk, and that market may lock up just like subprime.

A sudden withdrawal of mortgage credit is a new hazard to vulnerable housing markets, but I think (hope) the damage will no more than prolong the correction. One leading reason: the price of good, mainstream loans may well improve in this rapidly flapping flight to quality.

Here is a WSJ article discussing the topic:

Mortgage Defaults Spread,Snagging More Borrowers

By Ruth Simon and James R. Hagerty From The Wall Street Journal Online

The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.
At issue are mortgages made to people who fall in the gray area between "prime" (borrowers considered the best credit risks) and "subprime" (borrowers considered the greatest credit risks). A record $400 billion of these midlevel loans -- which are known in the industry as "Alt-A" mortgages -- were originated last year, up from $85 billion in 2003, according to Inside Mortgage Finance, a trade publication. Alt-A loans accounted for roughly 16% of mortgage originations last year and subprime loans an additional 24%.

The catch-all Alt-A category includes many of the innovative products that helped fuel the housing boom, such as mortgages that carry little, if any, documentation of income or assets, and so-called option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance. Loans taken by investors buying homes they don't plan to occupy themselves can also fall into the Alt-A category.

Borrowers who take out Alt-A mortgages are considered less risky than subprime borrowers because of their higher credit scores. But as the housing market cooled and loan volume declined, some lenders lowered their standards for Alt-As. Now a rising number of borrowers who took out these loans are running into trouble.

Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. "The credit deterioration has been almost parallel to what's been happening in the subprime market," says UBS mortgage analyst David Liu. The UBS report contrasts with testimony Federal Reserve Board Chairman Ben Bernanke gave to Congress yesterday. "Our assessment is that there's not much indication that subprime issues have spread into the broader mortgage market," Mr. Bernanke said.

To be sure, defaults have remained very low in the prime market -- and despite the uptick in bad loans, the problems in the Alt-A sector aren't as severe as those that have roiled the subprime market. Some 2.4% of Alt-A loans are at least 60 days past due, according to UBS, which looked at mortgages that were packaged into securities and sold to investors. That is well below the 10.5% delinquency rate for subprime mortgages. (During the housing boom, delinquencies were low for all types of loans because borrowers who wound up in trouble could refinance or sell.)

Some borrowers who took out Alt-A loans in recent years are starting to feel the strain. Johnny and Shirley Johnson, retirees in Cleveland, took out an option ARM when they refinanced their $92,700 mortgage in July 2005. The loan carried a 3.5% introductory rate that began moving upward a few months later. The couple, who live on a fixed income, are currently making the minimum payment on their loan. But they are afraid they won't be able to keep up with their loan and other debts once their monthly mortgage payment adjusts upward later this year.

"We don't want to lose our home," says Ms. Johnson. The couple is working with Acorn Housing Corp., a nonprofit group that provides housing counseling, in an effort to refinance into a 30-year fixed-rate mortgage. Though the monthly payment would be higher, the new loan would protect them against future increases.

Housing counselors and bankruptcy attorneys say they are seeing an increase in troubled borrowers who previously had good credit. "We have clients with 720-plus credit scores, and they are in awful products," says Jennifer Harris, executive director of the Home Loan Counseling Center in Sacramento, Calif. Some of these borrowers took out option ARMs with low introductory rates and are likely to fall behind when their monthly payment resets at a higher level, she says.

Thomas Gorman, a bankruptcy attorney in Alexandria, Va., says he is seeing more financially strapped borrowers who "probably bought more house than they could afford and then took on more credit-card debt" to furnish the house and pay for the move. When the housing market cooled, they were "caught in the middle," unable to sell their home or refinance and make their debt load more manageable.

Lenders are also tightening their standards. At a meeting with investors last week, IndyMac Bancorp Inc., the nation's largest Alt-A lender, said it had raised the minimum credit score at which borrowers could finance 100% of a home's value and took a number of other steps to tighten lending guidelines.

This week Lehman Brothers Holdings Inc.'s Aurora Loan Services unit raised the minimum credit score and reduced the maximum amount homeowners could borrower without documenting their income and assets.

Impac Mortgage Holdings Inc., which specializes in Alt-A loans, said recently that it had tightened its lending standards 17 times last year. The company cut back on riskier loans and began relying more on analytical tools to verify a borrower's income and creditworthiness. Other lenders were quick to scoop up many of those loans, but now they are also pulling back, says Impac President Bill Ashmore.

Lou Barnes, a mortgage banker in Boulder, Colo., says a client with a good credit score was turned down this week for a mortgage to buy an investment property with a small down payment and no documentation. That same borrower was approved for a "nearly identical" loan in August and November, he says. Still, Mr. Barnes calls the tightening "modest." Alt-A lenders are "nibbling at the edges," he says.

The UBS study found that the problems are greatest for Alt-A borrowers who took out interest-only adjustable-rate mortgages, which allow borrowers to pay interest and no principal in the loan's early years, with 3.71% of interest-only ARMs originated in 2006 at least 60 days past due. As in the subprime sector, the riskiest loans are those made to home buyers who put little, if any, money down and don't document their income or assets.

As delinquencies rise, some investors who bought lower-rated securities backed by these mortgages are likely to face losses, according to Mr. Liu of UBS. While defaults are expected to be lower than in the subprime sector, so are the reserves set aside to cushion bond investors
against such losses.

Defaults are much lower for option ARMs. But the problems with these loans could be "backloaded," says Mr. Liu, because borrowers with these loans are still making the minimum payment.

Glenn Costello, a managing director at Fitch Ratings Inc. in New York, expects the foreclosure rate for Alt-A loans to ultimately be only 10% to 20% of the rate for subprime borrowers.
Yet investor concerns about Alt-A loans are rising, according to Walter N. Schmidt, a mortgage investment strategist at FTN Financial Capital Markets in Chicago. A report from mortgage analysts at Barclays Capital in New York this week pointed to fraud as one reason for early defaults on Alt-A loans. The mortgage industry is battling a rash of cases in which borrowers, loan officers and appraisers collude in providing false information to induce lenders to advance more money than homes are worth.

Friday, February 16, 2007

Boom Turns to Bust

Another sad example of a crazed real estate market and buyers and investors who are uneducated about the risks of investing in real estate…

By Alex Frangos From The Wall Street Journal Online
The condominium boom that ended last year made a lot of developers very rich. Aleem Hussain, a journeyman property salesman with a winsome personality, wanted to be one of them.
He formed his real-estate company in 2004, calling it Main Street USA, after a nearby Disney World attraction. He bought a complex of 27 aging, two-story apartment houses in Orlando and set out to convert them into condos. His timing looked favorable. That year, for the first time, the average price of a condo in the U.S. exceeded that of a single-family home, and in the Orlando area, condo and house prices jumped 15%.

But not much has gone as planned for Mr. Hussain, 42 years old, nor has it for his hundreds of investors, who include a bunch of local sheriff's deputies. Today, Mr. Hussain's company is being liquidated by a federal bankruptcy court, and he is residing in the Seminole County jail, charged with 23 counts of federal mail and wire fraud.

Mr. Hussain's rise and fall illustrates one of the hazards of a frothy property market: inexperienced developers get in over their heads and drag unsophisticated investors down with them. "Schoolteachers, cops, doctors, priests, everyone thought they were Donald Trump," says Lewis Freeman, the court-appointed trustee administering Main Street's bankruptcy proceeding. Mr. Hussain's company, he contends, was a "microcosm of the total market. You had a lot of unqualified people getting easy money and able to go into businesses in which they didn't know what they were doing."

Mr. Hussain's 300 or so investors face potential losses of up to $400,000 apiece. Alan Cayo, 76, a retired Army officer who says he invested his "entire life savings" of $280,000 with Mr. Hussain, conjectures that the developer crossed the legal line only after financial problems began mounting. "It was incompetence, fraud, plus the market going down -- a triple whammy," he says.

Mr. Hussain's lawyer, James Lenihan of White Plains, N.Y., describes his client as "someone with good intentions who made bad judgments and got overextended." He says others at the company were also responsible for what went wrong. Mr. Hussain has pleaded not guilty.
Mr. Hussain was born in the South American nation of Guyana in 1964, according to a résumé recovered from his computer by investigators. In the 1980s and 1990s, he worked in real-estate sales in Pennsylvania, New Jersey and Costa Rica.

When he settled in Orlando about three years ago, the city was the epicenter of a national boom of conversions of rental apartments to condominiums. In 2005 and 2006, 24,550 apartments in the Orlando metro area, or 18% of the total in 2004, were taken off the rental market to convert, a greater number than in any other metropolitan area in the U.S., according to Reis Inc., a New York real-estate information firm.

The converters were attracted by rising prices. Between 2001 to 2004, the median resale price of existing condos nationwide jumped 57%, compared with a 25% increase for single-family houses, according to the National Association of Realtors. Real-estate experts say demand was boosted by baby boomers downsizing their homes upon retirement, and young people who were moving to cities. In addition, investors who had soured on the stock market had begun buying and selling condos.

Mr. Hussain envisioned Main Street USA, which is located south of Orlando near Gatorland amusement park, as a residential real-estate conglomerate. Its main business would be condo conversions. He and his partners formed "No-Fee Realty" to broker condo sales, and two subsidiaries, "USA Mortgage" and "Main Street USA Mortgage," to broker mortgages and home-equity loans, in some cases to enable property owners to invest in condos.
Former associates describe Mr. Hussain as charismatic and beguiling. He would demonstrate for employees his formidable sales skills by buttonholing potential home-financing customers at supermarkets and persuading them to fill out applications, which involved disclosing their Social Security numbers, recalls former employee Michael Lombardo.

To build trust with the local real-estate community, he took on a partner, Alan Randel, a real-estate broker who had worked in the area for several decades. Mr. Randel, the company's president, hasn't been charged in the case and declines to comment.

First, Mr. Hussain had to raise money to buy apartment buildings. His pitch to investors: Main Street would buy properties, convert them into condos, then sell them at a profit. He said he would set up a private real-estate investment trust to help finance the deals. Investors in the REIT, he said, would get steady, attractive dividends. Those who wanted higher, quicker returns, he said, could co-invest directly in the conversion projects.

In early 2005, he recruited Bernard Presha, who was retiring as public-information officer for the Orange County Sheriff's Department, to join as a vice president in charge of recruiting investors. Mr. Presha and others persuaded at least 10 sheriff's deputies to invest, according to bankruptcy-court documents. Jim Hanton, one of the deputies who invested, was put on a $25,000-a-year retainer. Bryan Margeson, a sheriff's department employee who taught criminal justice at a local community college, introduced Mr. Hussain at investment seminars and talked about how he thought Orlando's boom would continue for years.

Mr. Presha, who has filed a bankruptcy-court claim to recoup $305,000 he invested, says he quit after a couple of months because he wasn't good at persuading investors. Mr. Margeson, who says he lost $100,000, says Mr. Hussain "used me for some credibility, which I didn't realize they lacked."

"Jim [Hanton] said being a drug-enforcement cop, he was super skeptical when his wife suggested they invest," says Mr. Cayo, the retired Army man. "But after a luncheon with Aleem, he was convinced." Mr. Cayo says Mr. Hanton's involvement reassured him. "He was Anglo -- excuse me, but Aleem Hussain could be cousins with Saddam Hussein, so having Jim involved" was comforting.

Mr. Hanton, Main Street's vice president of operations, says he wasn't involved in condo sales or in company finances. He says he lost $130,000, and calls the situation "embarrassing."
In August 2005, Mr. Hussain held a dinner for prospective investors at the Citrus Club, an elite private establishment. According to several who attended, he projected a 100% return in 120 days or less for those who invested directly in a Main Street project.
Magic Marketing Deal

That summer, Mr. Hussain cut a deal with the Orlando Magic, the National Basketball Association franchise. For $350,000, Main Street secured the right to use the team's name in advertising, and to use head coach Brian Hill in a marketing video. Fans could register on the Magic's Web site to attend Main Street investment seminars at the team's practice facility. Attendees could spin a raffle wheel for a shot at free game tickets.

An Orlando Magic spokesman describes the pact as "a traditional team marketing agreement," and says the video was one of 20 the head coach recorded one day for various sponsors. He says the team conducts reference checks on its marketing partners and has never had a problem before.

Mark Pilkington, a counterterrorism official at the sheriff's department who invested $300,000, says the Magic marketing deal reassured him. "We realized there was a frenzy in condos. They were selling like crazy," he says. "I figure, why would he rip me off for $300,000 if he's involved with the Magic?"

In September 2005, with $10 million from about 200 investors, Mr. Hussain moved to buy the 27 apartment houses known as Waldengreen. The complex contained 278 units ranging in size from 517 to 1,079 square feet. His $18.5 million winning bid, financed by a private lender, was a "damn good price for the seller," says Hal Warren, senior director with brokerage Cushman & Wakefield Inc., who represented the South Florida investors who sold. Nevertheless, Mr. Hussain figured he'd turn a substantial profit. He paid $67,000 per unit; he intended to sell them for an average of $150,000.

Mr. Hanton, the sheriff's deputy, alerted him to an 18-acre lakefront estate for sale in Winter Garden, which county records show was owned by Khalil bin Laden, a brother of Osama bin Laden. Mr. Hussain planned to refurbish the Spanish-colonial-style mansion and to add houses, condominiums or stores on the grounds, company documents indicate.

Before Mr. Hussain and a business partner left for Dubai, where the two sides planned to finalize the deal, the company had lined up financing for a $5 million bid, says Jim O'Neil, a former Main Street mortgage processor. In Dubai, after being persuaded by the seller that values had risen, Mr. Hussain agreed to pay $7 million. "We gave Aleem a line not to go over and he jumped over it," says Mr. O'Neil.

Mr. Hussain began renovating the apartment complex, which he renamed Villas at Waldengreen, and his sales team began peddling the planned condominiums. Prospective buyers were invited to seminars conducted by Messrs. Hussain and Margeson of the sheriff's department.

Anthony Cortes, an airline mechanic and father of two, says Mr. Hussain and a retired sheriff's deputy made him an attractive offer: If he put 10% down to buy a condo at Waldengreen, Main Street would make his mortgage payments for two years during the renovations. In February 2006, Mr. Cortes put $14,000 down for a $140,000 unit and took out a mortgage for the rest.
Linda Paralitici, a 50-year-old mother of five who worked for Main Street as a sales broker, bought one unit and persuaded her brother to buy one. "We were not allowed to see the property," she says.

Lack of Experience

Inside the company, Mr. Hussain's lack of experience was showing. Former employees say the operation was disorganized from day one. "The whole thing was a disaster," says Mr. Lombardo, the former employee, who was hired to originate mortgage loans even though he had no experience at it. Piles of mortgage applications by condo buyers who had put down $5,000 deposits, he recalls, languished on the desks of co-workers who were supposed to find financing.

In 2005, signs began emerging that the flood of new condominiums was more than the market could bear. That July, price appreciation for condos nationwide slipped below that of single-family homes. Converters stopped purchasing new properties and smart speculators got spooked.

Main Street sold only 100 of Waldengreen's 278 units. Renovation was haphazard, former employees say. Rather than try to move renters out of one building at a time to allow for the conversions, Main Street tore apart single apartments all over the complex. Several contractors quit because they weren't paid.

Buyers who were told that Main Street would cover two years of mortgage payments began hearing from their lenders that they were in danger of default. Mr. Cortes says he took a second job as a home inspector to take on the $1,200 monthly payment on his unit.

When Colleen Sharkey joined Main Street as a senior vice president in mid-2006, she says, Mr. Hussain told her: "I need to hire you because we've grown so fast and I have no credibility with the bankers and business community." It took her three weeks to understand the books, which were a mess, she says. She says she concluded the company was nearly bankrupt.

By August, the company was out of cash, bankruptcy-court documents indicate. It had lost $3.6 million in deposits on two other apartment complexes it had tried to buy. Dividend payments to the REIT investors, which had been steady, stopped. On Sept. 23, several of those investors confronted Mr. Hussain at Main Street's offices, according to a claim one of them filed in bankruptcy court, and Mr. Hussain responded by writing on a legal pad: "It is our intention to repay all principal investment and interest promised to the above referenced clients at such time as we refinance or sell our assets to provide the necessary funds to accomplish this."
On Sept. 29, Main Street sought bankruptcy-court protection in Orlando. By then, several investors, including some sheriff's deputies, had contacted federal prosecutors to report that REIT dividend payments had stopped and that Mr. Hussain had refused to return their original investments, as promised by the investment documents.

In October, Mr. Hussain rented a car and drove to Atlanta to catch a flight to Costa Rica. U.S. Marshals, alerted by federal investigators in Orlando, met him at the gate and arrested him.
A federal grand jury indicted him on 23 counts of mail and wire fraud. Among the accusations: He falsely represented to investors that their money would be kept in the REIT, when in reality there was no REIT and the money sat in a checking account. And he told investors their dividend payments came from investment profits, when he actually was paying them from money invested by others.

Investigators also say Main Street sold condos at inflated prices to Mr. Hussain's friends or relatives to generate misleading appraisals that justified the higher prices paid by outside buyers.

Mr. Hussain's lawyer, Mr. Lenihan, says his client wasn't trying to flee the country, but was going to Costa Rica and Nicaragua for business and charity purposes. He argues that prosecutors have singled out his client, in part because of his Middle Eastern sounding name, when others at the company were also responsible. "This thing was not set up as a scheme to defraud people," he says. "This is what happens to good people with a good idea and lousy timing who get into trouble." Mr. Hussain's trial is scheduled for April.
Investors and others have filed $19 million of claims in bankruptcy court. Mr. Cayo says he has defaulted on the three condos he bought because broken pipes have made them unrentable. Mr. Cortes continues to make payments on his unit.

The Waldengreen complex, which fell into disrepair last fall, has been taken over by the group that financed Main Street's purchase of it. A new manager has been hired and the units are once again for rent.

The company's remaining assets are being liquidated by the court. It is unlikely that investors will recoup much of their money, according to several people involved in the case.
Mr. Margeson, the sheriff's deputy, refers to the affair as his "$100,000 lesson." He notes that he "never saw people strong-armed to invest. The sad part is people lined up to invest their money. It was the whole furor of the real-estate market."