Condo sales fall for 2nd straight quarter
By Eddie Baeb
Oct. 25, 2006
(Crain’s) — While the apartment market remains strong in Chicago and the suburbs, downtown condominium sales fell for a second straight quarter, raising concerns that a number of proposed high-rises may ultimately be scrapped.
Condo sales in new buildings fell to about 700 in the third quarter, down from about 1,200 in the second quarter and 1,600 in the first quarter. Sales this quarter also marked a 26% decline from the same period a year ago, according to a report to be released next month by Appraisal Research Counselors, a Chicago-based real estate consulting firm.
That’s bad news for developers, who generally need contracts for about half of their units to get financing required to begin construction.
“Some projects might not get built,” Gail Lissner, a vice-president at Appraisal Research, said during a presentation Wednesday at the Chicagoland Apartment Assn.’s industry outlook meeting.
However, Ms. Lissner noted that year-to-date condo sales have fallen only about 5% from last year’s record pace and still remain well above sales in the first nine months of 2004 and 2003.
The more stark figures: About 5,700 new condos are being marketed this year, most of which aren’t yet under construction, compared with just 4,700 that were marketed all of last year.
Of those 5,700 new condos, contracts have been signed on about 3,500 units through the third quarter, according to Appraisal Research data. “Sales aren’t keeping pace with new inventory,” Ms. Lissner said in an interview. Despite the decline in sales, Ms. Lissner said two condo developments that started this year are already under construction: CMK Co.’s 1720 S. Michigan Ave. and Mesa Development Co.’s The Legacy at Millennium Park. The third quarter provided more good news for apartment building owners, who are benefiting from job growth in the region along with tight supply because developers have been converting apartments into condominiums and not building many new apartment complexes.
Net apartment rents in the suburbs rose 5.9% in the third quarter from the year-earlier period, while rents downtown for “Class A” apartment buildings rose 8.9%.
Appraisal Research Vice-president Ron DeVries said he thinks the supply-demand trend will continue and cause rents in the suburbs and city to rise another 5% over the next 12 months.
Wednesday, October 25, 2006
Chicago Foreclosures Up 2x National Average
(Crain’s) — The number of Chicago-area homes entering some stage of the foreclosure process increased in September, keeping the metropolitan area’s rate at more than twice that of the nation.
A total of 6,177 homes in the eight-county metro area were in the foreclosure process last month, a nearly 5% increase from August, according to a report released by RealtyTrac Inc., which tracks foreclosures. The Chicago area represents the bulk of the 7,431 Illinois homes at some stage of foreclosure.
“Chicago foreclosure activity has increased more than 60% over the last months, boosting the foreclosure rate to an unexpectedly elevated level given the area’s low unemployment rate and above-average home price appreciation,” James Saccacio, CEO of RealtyTrac, said in a statement.
In the Chicago metro area, one household in every 471 are in some stage of foreclosure. That compares with one in 658 households for Illinois and one in 1,030 for the nation.
A total of 6,177 homes in the eight-county metro area were in the foreclosure process last month, a nearly 5% increase from August, according to a report released by RealtyTrac Inc., which tracks foreclosures. The Chicago area represents the bulk of the 7,431 Illinois homes at some stage of foreclosure.
“Chicago foreclosure activity has increased more than 60% over the last months, boosting the foreclosure rate to an unexpectedly elevated level given the area’s low unemployment rate and above-average home price appreciation,” James Saccacio, CEO of RealtyTrac, said in a statement.
In the Chicago metro area, one household in every 471 are in some stage of foreclosure. That compares with one in 658 households for Illinois and one in 1,030 for the nation.
Americans Paying Less for Previously Owned Homes
Americans are paying less for previously owned homes than they were a year ago, but the number of such homes sold continues to fall.
The National Association of Realtors reported today that the average price of a previously owned home fell to $220,000 in September, down 2.2 percent from September 2005. At the same time, the pace of home sales slowed to a seasonally adjusted annual rate of 6.2 million, down 1.9 percent from August.
Sales fell even further when compared with September 2005. In the past year, existing home sales slid 14.2 percent, the realtors association said.
The new sales numbers suggest a housing market that is downshifting, but it remains unclear just how much further sales and prices will fall. Market experts are divided over whether housing is just beginning a deep and lengthy correction, or merely leveling off after several years of explosive growth.
The association said the latest statistics indicate that the market is starting to stabilize, but many economists said it is far too early to say that the worst has passed.
The association said that the inventory unsold homes on the market declined to 3.8 million in September from 3.9 million in August, a sign that it found encouraging.
“The good news is that fewer new listings are coming on line,” Thomas M. Stevens, president of the association, wrote in its statement. He predicted prices would pick back up within a few months: “A stable sales pace is expected to draw down the number of listings to a supply balance that will support positive price growth.”
The September report was the second in a row to show falling prices; the August report was the first in more than a decade to show a year-over-year decline in the median price of an existing home.
Despite a small decline in inventories last month, the number of homes for sale remains near historic highs. Many economists believe that with such a large surplus of homes unsold, prices are likely to weaken for some time. At September’s pace, it would take 7.3 months to sell all the existing homes now on the market, the association said.
“A year ago, this ratio was 4.6 months,” said Joshua Shapiro, chief United States economist with MFR, a consulting firm. “And the sharp rise over the spring and summer suggests that pricing will weaken further in the months ahead.”
The data showed that selling a condominium in September was more difficult than selling a single-family home. Condo sales fell by 3.2 percent from August, and inventories rose to an 8.6-month supply. By contrast, single-family home sales fell 1.6 percent while inventories rose to 7.1 months.
Overall existing home sales and prices fell the fastest in the Northeast, by 3.7 percent from August, and median prices there slipped 5.1 percent from a year earlier, to $259,000. In the West, sales volume fell 3.1 percent from August, and prices dropped 4.3 percent from a year earlier, to $332,000. In the Midwest sales decreased 2.8 percent from August; prices dropped 2.3 percent from last year, to $208,000.
The South was the only region where sales picked up, rising 0.4 percent in September. Prices there, however, were 1.6 percent lower than a year ago.
By JEREMY W. PETERS
Published: October 25, 2006
New York Times.com
The National Association of Realtors reported today that the average price of a previously owned home fell to $220,000 in September, down 2.2 percent from September 2005. At the same time, the pace of home sales slowed to a seasonally adjusted annual rate of 6.2 million, down 1.9 percent from August.
Sales fell even further when compared with September 2005. In the past year, existing home sales slid 14.2 percent, the realtors association said.
The new sales numbers suggest a housing market that is downshifting, but it remains unclear just how much further sales and prices will fall. Market experts are divided over whether housing is just beginning a deep and lengthy correction, or merely leveling off after several years of explosive growth.
The association said the latest statistics indicate that the market is starting to stabilize, but many economists said it is far too early to say that the worst has passed.
The association said that the inventory unsold homes on the market declined to 3.8 million in September from 3.9 million in August, a sign that it found encouraging.
“The good news is that fewer new listings are coming on line,” Thomas M. Stevens, president of the association, wrote in its statement. He predicted prices would pick back up within a few months: “A stable sales pace is expected to draw down the number of listings to a supply balance that will support positive price growth.”
The September report was the second in a row to show falling prices; the August report was the first in more than a decade to show a year-over-year decline in the median price of an existing home.
Despite a small decline in inventories last month, the number of homes for sale remains near historic highs. Many economists believe that with such a large surplus of homes unsold, prices are likely to weaken for some time. At September’s pace, it would take 7.3 months to sell all the existing homes now on the market, the association said.
“A year ago, this ratio was 4.6 months,” said Joshua Shapiro, chief United States economist with MFR, a consulting firm. “And the sharp rise over the spring and summer suggests that pricing will weaken further in the months ahead.”
The data showed that selling a condominium in September was more difficult than selling a single-family home. Condo sales fell by 3.2 percent from August, and inventories rose to an 8.6-month supply. By contrast, single-family home sales fell 1.6 percent while inventories rose to 7.1 months.
Overall existing home sales and prices fell the fastest in the Northeast, by 3.7 percent from August, and median prices there slipped 5.1 percent from a year earlier, to $259,000. In the West, sales volume fell 3.1 percent from August, and prices dropped 4.3 percent from a year earlier, to $332,000. In the Midwest sales decreased 2.8 percent from August; prices dropped 2.3 percent from last year, to $208,000.
The South was the only region where sales picked up, rising 0.4 percent in September. Prices there, however, were 1.6 percent lower than a year ago.
By JEREMY W. PETERS
Published: October 25, 2006
New York Times.com
Fed Holds Rates Steady
Key rate unchanged at 5.25 percent but with the economy slowing and inflation looming, what's the central bank's next move?
By Paul R. La Monica, CNNMoney.com editor at large
October 25 2006: 3:04 PM EDT
NEW YORK (CNNMoney.com) -- The Fed held interest rates steady Wednesday and noted again that the economy was slowing, but the central bank also indicated it's still wary of inflation - a sign the Fed may not cut rates in coming months as many investors had hoped.
Federal Reserve policy-makers held their target for the federal funds rate, an overnight bank lending rate that helps determine the interest consumers pay on auto and other loans, at 5.25 percent.
The move, widely expected on Wall Street, marked the third straight time the Fed left rates alone after raising them 17 consecutive times through June of this year. But now many economists and market strategists think Fed Chairman Ben Bernanke & Co. face tougher decisions ahead.
Some argue the Fed should consider rate cuts next year in a bid to make sure the economy doesn't tumble into recession. Others who fear inflation is a more pressing threat say the Fed should start raising short-term rates again.
Again, there was dissension within the Fed on this matter.
For the third consecutive meeting, Federal Reserve Bank of Richmond President Jeffrey Lacker voted against a pause and for a quarter-point rate hike. The other 10 members of the Fed's policy-making committee voted to leave rates unchanged.
Read the Fed statement
The Fed did, however, appear to indicate it may be more worried about a slowdown. In its statement, the Fed said "economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market."
That differs slightly from the language on the economy in the last statement when the central bank said that "moderation in economic growth appears to be continuing."
But the Fed added that the economy "seems likely to expand at a moderate pace" going forward.
It also kept its language about the threat of inflation, saying that "readings on core inflation have been elevated" and that "some inflation risks remain." The Fed did remove a phrase about energy prices and other commodity prices having "the potential to sustain inflation pressures."
David Kelly, an economic advisor at Putnam Investments in Boston, said the changes to the statement show the Fed is fairly satisfied with the prospects for economic growth next year as well as the inflation picture.
"This statement is an expression of increased confidence in the economic outlook," Kelly said.
As such, Kelly said he thinks the Fed will probably start cutting interest rates sometime in 2007. He does not expect the Fed to change rates at its next meeting on December 12, however.
By Paul R. La Monica, CNNMoney.com editor at large
October 25 2006: 3:04 PM EDT
NEW YORK (CNNMoney.com) -- The Fed held interest rates steady Wednesday and noted again that the economy was slowing, but the central bank also indicated it's still wary of inflation - a sign the Fed may not cut rates in coming months as many investors had hoped.
Federal Reserve policy-makers held their target for the federal funds rate, an overnight bank lending rate that helps determine the interest consumers pay on auto and other loans, at 5.25 percent.
The move, widely expected on Wall Street, marked the third straight time the Fed left rates alone after raising them 17 consecutive times through June of this year. But now many economists and market strategists think Fed Chairman Ben Bernanke & Co. face tougher decisions ahead.
Some argue the Fed should consider rate cuts next year in a bid to make sure the economy doesn't tumble into recession. Others who fear inflation is a more pressing threat say the Fed should start raising short-term rates again.
Again, there was dissension within the Fed on this matter.
For the third consecutive meeting, Federal Reserve Bank of Richmond President Jeffrey Lacker voted against a pause and for a quarter-point rate hike. The other 10 members of the Fed's policy-making committee voted to leave rates unchanged.
Read the Fed statement
The Fed did, however, appear to indicate it may be more worried about a slowdown. In its statement, the Fed said "economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market."
That differs slightly from the language on the economy in the last statement when the central bank said that "moderation in economic growth appears to be continuing."
But the Fed added that the economy "seems likely to expand at a moderate pace" going forward.
It also kept its language about the threat of inflation, saying that "readings on core inflation have been elevated" and that "some inflation risks remain." The Fed did remove a phrase about energy prices and other commodity prices having "the potential to sustain inflation pressures."
David Kelly, an economic advisor at Putnam Investments in Boston, said the changes to the statement show the Fed is fairly satisfied with the prospects for economic growth next year as well as the inflation picture.
"This statement is an expression of increased confidence in the economic outlook," Kelly said.
As such, Kelly said he thinks the Fed will probably start cutting interest rates sometime in 2007. He does not expect the Fed to change rates at its next meeting on December 12, however.
Sunday, October 15, 2006
Stop Paying PMI
Millions of homeowners were required to get private mortgage insurance (PMI) at the time they purchased their homes, due to having made downpaments of less than 20 percent. The monthly mortgage payment includes as much as $150 that represents the PMI premium.
You can get so accustomed to making that identical mortgage payment every month, some people stay on auto-pilot and continue paying for a policy they’re entitled to cancel.
Typically, if you’ve reached the 20% equity level, you’re eligible. If your mortgage is less than 5 years old, it’s 25%. You also need to have a good track record for making mortgage payments. That means having had no more than one late-payment penalty in the past year; no payments over 30 days late in that same time frame; nor, any notice of default recorded against the property.
If that sounds like you, and if you haven’t gone through the process, there are user-friendly resources to help you get the cancellation process started.
First, you’ll need to confirm your eligibility. The Mortgage Insurance Companies of America (MICA), the trade association for mortgage insurers, sponsors an excellent website (http://www.privatemi.com/cancel/index.cfm) that offers an eligibility calculator, as well as sample letters to send to mortgage servicers that will help you jump start the cancellation process.
If you are eligible to cancel your PMI, your servicer might require an updated appraisal of your home. Don’t rush out and have an appraisal done yourself, though. Mortgage servicers use their own sources to select an appraiser for the job.
If you don’t want to handle the cancellation personally, you can hire someone else to do it for you. PMI cancellation services take over all of the correspondence, escrow account analyses and any disputes with servicers. Figure on spending about $500, including the appraisal. An Internet search for “Cancel PMI” will help you locate a local company.
You’ve worked hard to have accumulated 20% equity in your home. Don’t pay for something you no longer need!
Even if you know you’re not eligible yet, use the eligibility calculator to figure out when you WILL be and keep that date posted prominently somewhere in your records. Or even, for instance, on the refrigerator. It’ll remind you daily of something positive you’re working toward that’ll be worth celebrating when the time comes.
There is another strategy buyers are using these days and that is the second line of credit. By getting a 80/20 or 80/10/10 loan, lenders will waive the PMI but then you will of course have the second line of credit payment until that is paid off. But the benefits may be worth it in some cases.
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