Weekly Update

Though tragic, last week’s unfortunate assassination of former Pakistan Prime Minister Benazir Bhutto created only a minor ripple in stock and bond markets. Housing was again the more pressing concern. On that sinking front, home prices in 10 major metropolitan areas in October were down 6.7% from a year earlier, according to the S&P/Case-Shiller home-price indexes. The decline exceeded the previous record year-to-year decline of 6.3% in April 1991, when the economy was emerging from a recession. Meanwhile, sales of new homes continued on their downward spiral, falling to a 12-year low in November. Specifically, purchases tanked 9% to an annual pace of 647,000, which exceeded even the lowest estimate. The continued slowdown in home sales is also taking a toll on mortgage demand, with mortgage-application activity – both refinance and purchase – recently posting at the lowest level of the year, according to the Mortgage Bankers Association.

Eric P. Egeland
RE/MAX Advanced
847.337.7090
www.HomesInBG.com

Weekly Recap

The economic news was generally positive last week, though every release seemed to be accompanied with a “yes, but.” For example, housing starts posted at 1.187 million annualized units in November, which beat the consensus estimate by over 10,000 units. But the nattering nabobs were compelled to douse any optimism with multiple buckets of pessimism, such as “the industry is still struggling with significant overhang,” and “housing starts would need to fall to around 500,000 annually to soak up the excess inventory.”

The GDP rose at a robust 4.9% annual rate – the strongest rate since 2003. GDP growth was powered in large part by continued consumer spending (which only occurs when consumers are confident about the future). In fact, consumer spending rose 1.1% in November, the most in more than two years, as incomes grew and shoppers took advantage of early holiday discounts. But the highlighted media response to the strong economic growth came from one prominent, pessimistic economist: “You can hear the screech and see the skid-marks of the economy slowing down from the third to the fourth quarter. We're going to go from this supercharged rate to somebody-slammed-on-the-brakes.'' There are still serious issues that must be confronted in both housing and mortgage lending. Yes, inventory levels are too high, and prices will likely need to fall further to stimulate more demand. Foreclosures are also on the rise. RealtyTrac reported 201,950 foreclosure filings in November, a 68% increase over November 2006. (But November's filings were actually a 10% decrease from October's 224,451, which showed a spike after an 8% decrease from August to September.) There's work to be done, to be sure, but it's important (and fair) to appropriately note improvements when they occur.

Eric P. Egeland
RE/MAX Advanced
773.294.4491
www.HomesInBG.com

Buffalo Grove updates for 12/12/07

Fairly slow day yesterday.

Single Family Homes
-1402 Westchester a 4bed 3.5bath was listed for $625,000
-580 Checker a 4bed 2.5 baht closed for $435,000

Attached Homes
-3 New Listings
-101 Old Oak a 2bed 2bath listed for $225,000
-2514 Waterbury a 3bed 2.5bath condo was listed for $475,345
-150 Lake Blvd. a 2bed 2bath condo was listed for $191,900
-No closings

Fed cuts rate a 1/4 point

The Federal Reserve cut benchmark U.S. interest rates by a modest quarter-percentage point on Tuesday. Many economists were expecting a 50 basis point cut. The central bank's decision takes the federal funds rate, which governs overnight lending between banks, down to 4.25 percent. Wall Street was disappointed with the modest cut, but is is still a move that should help mortgage rates.

Mortgage Freeze

The big news story of the week was undoubtedly the Bush administration's mortgage rate freeze negotiated with the country's largest lenders. The plan, dubbed Hope Now, is an alliance of financial-industry stalwarts, (including Citigroup, JPMorgan Chase, and Wells Fargo) that could provide relief to up to 1.2 million borrowers.Hope Now offers assistance in one of three ways: freezing rates (up to five years), refinancing into a new private mortgage, or obtaining a loan backed by the Federal Housing Administration. Borrowers who have rates scheduled to adjust between January 2008 and July 2010 and who are current on their payments and have been no more than 60 days late in the past year qualify for the deal.The timing of the announcement was fortuitous, to be sure; the Mortgage Bankers Association reported that homeowners fell behind on their mortgage payments at the highest rate in more than two decades last quarter.Fortunately, the economy continues to mitigate some of the subprime damage and defy conventional wisdom that it's headed toward a recession. On the contrary, employers hired more workers than forecast in November, with payrolls rising by 94,000 and hourly wages increasing 0.5% to $17.63.Just as important, workers – new and old – were found to be more efficient: Worker productivity accelerated more than forecast in the third quarter, rising at an annual rate of 6.3%, while labor costs dropped 2%, the most in four years. Greater efficiency eases pressure for companies to raise prices to counter rising energy costs, further diminishing the threat of inflation.Last week the 30-year fixed-rate loan averaged 5.96%, while the 15-year fixed rate loan averaged 5.65%, according to Freddie Mac's weekly survey. These are levels unseen in over two years.

Eric P. Egeland
RE/MAX Advanced
847.337.7090
www.HomesInBG.com

Buffalo Grove's November 2007 Closing Stats

Due to numerous requests, I decided to post the closing statistics for the month of November.

Buffalo Grove Single Family Homes
-16 Single Family Homes Closed
-The closing prices ranged from $215,000-$740,000
-Average closing price was $403,059
-Average market time was 201 days
-Sold properties closed averaging 95.11% of their Final List Price

Buffalo Grove Attached Homes
-17 Attached Homes Closed
-The closing prices ranged from $130,000-$365,000
-Average closing price was $211,753
-Average market time was 152 days
-Sold properties closed averaging 94.95% of their Final List Price