Old Farm Foreclosure

Credit Markets

No one can overstate the need to unfreeze the credit markets. Home prices dropped in 24 of 25 U.S. metropolitan areas in July, led by declines in Las Vegas and the coastal cities of California , as foreclosures depressed prices and accounted for a fifth of all sales. Foreclosed houses tend to sell at a discount of about 20% to owner-maintained houses; these discounts are weighing on prices throughout the country.

Meanwhile, the market for commercial paper, short-term borrowing by businesses, has nearly frozen to a standstill. Even giants like General Electric are suffering. The industrial giant had to sell $3 billion worth of preferred stock to investing legend Warren Buffet and had to place an additional $12 billion of stock in the equity markets to maintain its triple-A bond rating.

To get credit flowing again, banks have to start lending to each other at lower rates. When banks charge each other a higher premium to borrow, the cost trickles down to the consumer. One indicator of how willing banks are to lend to each other is the "TED Spread," which measures the difference between the three-month LIBOR (London Inter-bank rate) and the three-month Treasury rate. The higher the spread, the greater the aversion to risk. Last Tuesday, the spread surged to 3.5%, its highest level in more than 25 years.

The fact is the $700 billion rescue package is the icebreaker for our frozen credit markets. Sure, the prospect of re-floating a few free-wheeling fat cats and funding a few pork-barrel projects appeals to no one, but the prospect of cutting off our nose to spite our face isn't very appealing either. We might not like it, but Congress did the right thing.

Eric P. Egeland
RE/MAX UNITED
847.337.7090
HomesInBG.com

Time to Nationalize Fannie & Freddie?

Fannie Mae’s and Freddie Mac’s impact on the mortgage market can’t be understated. Both borrow huge sums of money to buy mortgages. Their demand is a major force in setting the overall rate on standard mortgages, particularly now that many other sources of financing have evaporated. And even though both companies have recently been purchasing larger amounts of mortgages, rates on mortgage loans have stayed relatively high.

If the government believes cheaper borrowing costs are central to a housing recovery, it will have to do something to get mortgage rates to decline in line with Treasury rates. One guaranteed way to lower the spread between Treasury and mortgage rates is for the government to take over Fannie and Freddie. A takeover would lower Fannie’s and Freddie’s borrowing costs, which, in turn, would lower mortgage rates.

More competition from the private sector is another, though less timely, solution. Nationalizing Fannie and Freddie would drop mortgage rates immediately, to be sure, but few private firms would be able to match Fannie’s and Freddie’s borrowing costs. That would mean less innovation and fewer mortgage options for borrowers, and that could hurt the housing and mortgage markets in the long run.

Eric P. Egeland
RE/MAX UNITED
847.337.7090
HomesInBG.com

Housing Recap

Yesterday’s housing bill is today’s housing law. Among the highlights, first-time home buyers will receive a tax credit of 10% of the purchase price of their home, up to $7,500. If you are wondering how Congress defines a first-time home buyer, it’s someone who hasn’t owned a house in the past three years. The validity and efficacy of the credit has to be questioned, because it’s really not a credit; it must be repaid in equal installments over the subsequent 15 years.

Another highlight helps people who have fallen behind on their mortgages and who owe more than their houses are worth. In such situations, refinancing is difficult, if not impossible. The law seeks to resolve this dilemma by encouraging lenders to forgive delinquent borrowers’ debt down to 87% of the property’s current appraised value. At that point the homeowner can than refinance under an FHA plan (though he or she will be expected to pay higher FHA insurance premiums).

The new law imposes few changes on Fannie Mae and Freddie Mac. Both institutions are a mess, yet the law oddly imposes no changes in management or business approach and no penalties on shareholders. Taxpayers instead are given two dubious protections: The first is that the treasury secretary will have the right to dictate terms if the government has to stump up equity capital for the firms. The second is the creation of a new regulator, whose effectiveness one must question, considering the effectiveness of past regulators.

Outside of the housing market, general economic health is waning. U.S. second-quarter gross domestic product came in below expectations, rising 1.9% versus expectations for a 2.2% rise. Slowing GDP, in turn, is impacting employment, and not in a good way. On Friday, the employment situation showed that payrolls declined by 51,000, pushing the unemployment rate up to 5.7%.

Eric P. Egeland
RE/MAX United
847.337.7090
HomesInBG.com

Housing Bill

We saw a lot of coverage to last week’s House vote to offer $300 billion in assistance to troubled homeowners and to throw government support behind Fannie Mae and Freddie Mac. The bill has won endorsements from key senators in both parties and convinced President Bush to withdraw his long-standing veto threat.

Major provisions of the bill for mortgage markets include permanently increasing the cap on the size of mortgages guaranteed by Fannie Mae and Freddie Mac to a maximum of $625,000 from $417,000. It would also raise the FHA maximum loan limits for high-cost areas to $625,000. For first-time home buyers, the bill includes a tax refund worth up to 10% of a home’s purchase price but no more than $7,500. That said, the refund really isn’t a refund – it’s more of an interest-free loan, because the “refund” has to be repaid over 15 years in equal installments.

The bill will likely give the mortgage and housing markets an immediate boost, but let’s not get carried away with the back-slapping. Artificial stimulus packages are fickle; you can’t be assured that what you want stimulated is actually being stimulated. Besides, markets, if left to their own devices, eventually get it right, though sometimes not as quickly as we’d like. But when they do get it right, they tend to get it right on a more permanent footing.

Eric P. Egeland
RE/MAX UNITED
847.337.7090
HomesInBG.com

Old Farm Village Activity (6 months)

Old Farm Village (Buffalo Grove) Market activity

Active on the market
1301 MADISON DR $429,900 3 Beds 2.1 Baths
1366 DEVONWOOD DR $439,500 3 Beds 2.1 Baths
225 Stanton DR $440,000 3 Beds 2 Baths
136 COPPERWOOD DR $460,000 3 Beds 2.1 Baths
1502 Quaker Hollow CT $524,900 4 Beds 2.2 Baths
1176 Sandhurst DR $539,900 4 Beds 2.1 Baths
23 LONGRIDGE CT $542,900 4 Beds 2.1 Baths
1537 Madison DR $629,000 3 Beds 3.1 Baths

Under Contract
1402 Madison DR $484,900 4 Beds 2.1 Baths
103 Newfield DR $554,000 4 Beds 2.1 Baths

Closed
142 Thompson BLVD $399,900 closed for $378,000 4 Beds 2.1 Baths
1408 MARGATE DR $438,900 closed for $402,000 3 Beds 2.1 Baths
95 Newfield DR $424,500 closed for $410,000 3 Beds 2.1 Baths
250 Stanton CT $499,900 closed for $460,000 3 Beds 2.1 Baths
11 COPPERWOOD DR $489,000 closed for $477,000 4 Beds 2.1 Baths
85 NEWFIELD DR $524,900 closed for $510,000 4 Beds 3.1 Baths
393 THOMPSON BLVD $549,900 closed for $525,000 4 Beds 2.1 Baths
214 STANTON DR $575,000 closed for $543,500 5 Beds 2.1 Baths

Eric P. Egeland
RE/MAX UNITED
847.337.7090
HomesInBG.com

Weekly mortgage recap

An anemic economy, sinking home values and soaring gas prices pushed consumer confidence to its lowest level since 1992, the U.S. Confidence Board reported last week Many news outlets jumped on the news, spinning it to suggest the economy is spiraling downward like an unimpeded helix.
But maybe things really aren't all that dire. Gross domestic product – the output of goods and services produced by labor and property – increased at an annual rate of 1.0% in the first quarter of 2008, according to final estimates released by the Bureau of Economic Analysis. In comparison, GDP increased only 0.6% in the fourth quarter of 2007. The data suggest economic growth is accelerating.

Perhaps consumers would feel more upbeat if they knew that existing home sales are stabilizing, with sales rising 2% in May from April to a seasonally adjusted annual rate of 4.99 million units. At the same time, inventory of existing homes fell 1.4% to 4.49 million units in May, which represents a 10.8-month supply at the current sales pace, down from a 11.2-month supply in April.

The Federal Reserve appeared upbeat by switching its focus to abating inflation from inflating the economy. But although the Fed said it expects inflation to moderate "later this year,” it admitted that it is concerned over “continued increases in the prices of energy and other commodities.”
Credit markets didn't appear too terribly concerned about inflation; mortgage rates finally held firm for a week, with the prime 30-year fixed-rate mortgage averaging 6.62%, the prime 15-year fixed-rate mortgage averaging 6.19%, and the prime 5/1 adjustable-rate mortgage averaging 6.28%, according to Bankrate.com's weekly survey.

Eric P. Egeland
RE/MAX United
847.337.7090
HomesInBG.com

Interest Rate Cut?

A sluggish economy and a spike in foreclosures suggest an interest-rate cut is in order, but a weak currency and creeping inflation suggest a rate hike is in order (rate increases make a currency more attractive vis-à-vis other currencies). What is the Federal Reserve to do?

Clues will be forthcoming in the Fed's Beige Book, to be released on Wednesday. It will likely prove that the Fed's greater concern is inflation, but that could easily change if Friday's consumer price index shows consumer prices rising at an intolerable rate.

Either way, borrowers can expect a spike in rate volatility. Gaming interest rates – an already difficult endeavor – will become that much more difficult in coming weeks. Bankrate.com's survey showed that mortgage rates increased across the board through most of last week, but the survey was released before Friday's employment report, which could just as easily drop rates this week.

So what's the longer-term rate trend that's likely to emerge? Unfortunately, it's impossible to tell at this point because of the schizophrenia of recent economic data releases.

Eric P. Egeland
RE/MAX United
847.337.7090
HomesInBG.com

Just Listed in Old Farm Village

Eric P. Egeland | RE/MAX UNITED | 847.337.7090 136 Copperwood Dr., Buffalo Grove, IL Just Listed!! Premium lot in Old Farm Village. 3BR/2.5BA Single Family House offered at $460,000 Year Built 1987 Sq Footage Unspecified Bedrooms 3 Bathrooms 2 full, 1 partial Floors Unspecified Parking 2 Car garage Lot Size 9,583 sqft HOA/Maint $0 per month DESCRIPTION Premium lot in sought after Old Farm Village. Property backs up to Westchester Park & Bike path. Professionally landscaped yard. These original owners have done all the hardwork for the next owner...New in '03-'05: Roof, Air, Furnace, 2nd Flr. windows, window treatments, water heater, sump pump, slider doors to patio, patio extension, light fixtures, can lights, fridge, upstairs carpet, master bath. Top rated schools district, Stevenson HS Eric P. Egeland RE/MAX UNITED 847.337.7090 HomesInBG.com see additional photos below PROPERTY FEATURES Central A/C Central heat Fireplace High/Vaulted ceiling Walk-in closet Tile floor Family room Living room Bonus/Rec room Dining room Refrigerator Stove/Oven Attic Basement Washer Dryer Laundry area - inside Balcony, Deck, or Patio Yard COMMUNITY FEATURES Playground ADDITIONAL PHOTOS Seller contact info: Eric P. Egeland RE/MAX UNITED 847.337.7090 For sale by agent/broker Equal Opportunity Housing Posted: Jun 2, 2008, 11:08am PDT

Eric P. Egeland

RE/MAX UNITED

847.337.7090

HomesInBG.com

Rates up or down?

Will the recent cut in the fed funds rate translate into lower mortgage rates? The answer is an equivocal yes and no. It's possible we'll see lower rates on some adjustable rate mortgages, but it's no slam-dunk. ARMs are more closely linked to the fed funds rate than fixed-rate mortgages, to be sure, but have only fallen about half a percentage point since September. ARMs played a leading role in the recent foreclosure fiasco, which has kept their rates higher than what would normally be expected.

Fixed-rate mortgages, on the other hand, are driven by rates on 10-year treasury notes. Rates on a 30-year fixed mortgage are typically 1.5 percentage points higher than the rate on the 10-year Treasury note, but because of increased risk perception – brought on by higher foreclosure rates and a stagnating housing market – that premium has expanded to 2.3 percentage points.

The 10-year Treasury note rate, in turn, is driven by inflation expectations. On that front, rising inflation concerns are pushing 10-year treasury rates higher.
So what's the outlook for mortgage rates? The focus is shifting back to inflation, which means rates are unlikely to go much lower. But while inflation could pressure 10-year treasury rates, a narrowing risk premium could offset the impact on fixed-rate mortgages. In other words, odds favor rates moving higher, but not much higher, so anyone sitting on the sidelines waiting for a drastic improvement is likely waiting in vain.

Eric P. Egeland
RE/MAX United
847.337.7090
HomesInBG.com

Rising Interest Rates

Efficient markets are synonymous with confidence and liquidity – the result of investors' appetite to underwrite risk and savers' appetite to provide leverage to investors who want to underwrite risk. As risk appetite increases, liquidity follows, producing an increase in overall confidence.

Perhaps higher interest rates could increase both liquidity and confidence. Higher rates would strengthen the U.S. dollar – which has been in a free fall the past two years – and, therefore, strengthen foreign confidence in the U.S. economy. Walter Bagehot, a 19th century British economist, noted as much 140 years ago when he called a seizing of internal markets "a domestic drain” and the flight of capital abroad "an external drain." Bagehot argued that raising interest rates restores foreign confidence and makes domestic banks more willing to lend.

But would higher rates further ravish the housing market? Interest rates exert influence on home prices, to be sure, but the relationship is surprisingly tenuous. In 1980, the prime 30-year fix-rate mortgage averaged 13.7%, rising to 16.1% in 1982. Home prices during that period tumbled over 20%. From 1984 through the present, mortgage rates have steadily trended lower, but in 1989 the housing market endured a major 15% correction. Of course, it's enduring another correction today on relatively low rates.

At this stage in the game, more willing lenders are more important to reviving the housing market than marginally lower interest rates. After all, what good is cheap money if no one is willing to lend it?

Eric P. Egeland
RE/MAX United
847.337.7090
HomesInBG.com

Weekly Mortgage Recap

The cup overflowed with an assortment of economic data last week. Of most interest to mortgage watchers were the disappointing data on inflation. The producer price index for finished goods rose 1.1% in March, after a 0.3% increase in February, while the core index, which excludes food and energy, climbed 0.2% after rising 0.5% in February and 0.4% during January.

The data were equally disconcerting on the consumer end, where prices rose 0.3%, exceeding most economists' expectations. Stripping out volatile food and energy costs, the core consumer price index gained 0.2%. Inflation pressures are being stoked by rocketing crude oil prices, which broached $115-a-barrel last week, and increased food costs as commodity prices around the world continue to soar.

Surprisingly, the mortgage market's reaction to the inflation threat was upbeat, which suggests inflation may not be as onerous as the PPI and CPI numbers would imply. The benchmark 30-year fixed-rate mortgage rose only seven basis points to 6.03%, the 15-year fixed-rate mortgage rose nine basis points to 5.65%, and the 5/1 adjustable-rate mortgage actually fell 10 basis points to 5.85%, according to the Bankrate.com national survey.

Housing starts fell to a 17-year low in March – a decline that exceeded the consensus estimate twice over. However, given the current overhang in housing inventory, it's far better for housing starts to be low than high. Suppliers must reduce inventory to return some semblance of order to the market, and housing starts suggest that's occurring.

A glass-half-full spin could also be applied to the news that Freddie Mac is planning on buying $10 billion to $15 billion in jumbo mortgages in an effort to counterbalance the upper-end housing market. Freddie Mac used to be restricted from buying jumbo loans – mortgages above $417,000. Thanks to Congress, the new limit now exceeds $729,000 in many areas. Freddie Mac's move to purchase larger loans will grant home buyers cheaper rates than they would have otherwise received.

Eric P. Egeland
RE/MAX Advanced
847-337-7090
HomesInBG.com

Weekly Mortgage Recap

Recession or no recession? That was last week's $64,000 question, and it appears we are listing toward the former. Federal Reserve Chairman Ben Bernanke acknowledged as much, stating that “it now appears likely that real gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly.”

Friday's labor report added gravitas to the Fed chairman's sentiments. Government figures showed the economy lost jobs for a third straight month in March, pushing unemployment up to 5.1%. The elimination of 80,000 jobs was the most since March 2003, when the labor market was still struggling to recover from the 2001 recession. Some professional soothsayers are now portending a 5.5% unemployment rate by year's end (of course, many of these soothsayers are no more accurate than a random coin flip).

Meanwhile, Fannie Mae – the quasi-government agency that buys and securitizes mortgages – continues to up the ante, setting new rules on what mortgages it will buy. On that front, Fannie Mae will no longer purchase loans made to borrowers with credit scores below 580, nor will it purchase loans that have been more than 60 days past due within the year.

Fannie Mae is also correlating fees to credit scores. (It already correlates interest rates to them.) The good news is that fees will drop for borrowers with credit scores of 720 and above. The bad news is that fees double to 1.5% of the loan amount for borrowers with credit scores between 660 and 680. For borrowers with credit scores below 660, fees are even higher.

Higher fees, interest rates, and a non-existent subprime market are making FHA-insured loans a viable alternative for many borrowers with marginal credit. Yes, there is an upfront fee of 1.5% of the loan amount, which can be rolled into the mortgage, and there's a monthly fee too, but FHA doesn't charge a higher premium to borrowers with low credit scores.

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

Weekly Economic Recap

The laws of economics really do hold. Sales of existing homes rose to a 5.03 million annual rate in February, an unexpected 2.9% increase from January's revised 4.89 million annual rate, according to the National Association of Realtors last Monday. The news flew over the heads of the putative experts, who were calling for a drop to 4.85 million.

So why do the laws of economics hold? Increased sales are being spurred by lower prices. The median existing home price was $195,900 in February, down 8.2% from $213,500 in February 2007. Some of the same experts lamented the drop in price, but shouldn't have. Falling prices improve affordability and encourage people to make purchases, which is exactly what's beginning to occur.

The same holds true on the new-home front, where the median price decreased 2.7% to $244,000 and sales dropped 1.8% to a 590,000 annual rate, which, though a decrease, still beat the consensus estimate by 15,000 units. Just as important, the number of new homes for sale at the end of February dropped to 471,000, the fewest since July 2005, indicating builders are making headway in clearing the inventory glut. (Lower prices also motivate suppliers – builders in this case – to cut production.)
Lower prices have also stimulated mortgage activity. The Mortgage Bankers Association reported that its four-week moving average for the seasonally adjusted market index is up 11.3%, with the purchase index up 3.1% and the refinance index up 18.3%, thanks to recent Federal Reserve actions that have shored up the mortgage market by allowing the 30-year fixed-rate mortgage to remain below 6% and the 15-year fixed-rate mortgage to hang around 5.5%.

Eric P. Egeland
RE/MAX ADVANCED
847.337.7090
HomesInBG.com

Weekly Economic Recap

The Federal Reserve's goal last week was to lube the credit-markets' sticky gears. Mission accomplished. First, the Fed buckled and agreed to serve as guarantor of last resort for Bear Stearns – a once mighty Wall Street investment house – and its rapidly depreciating portfolio of mortgage-backed securities (MBS). In turn, the guarantee prompted another Wall Street firm, JP Morgan, to buy Bear for little more than a song and a quick two-step dance.

The Fed then applied more gear-lubing grease with a 75-basis point cut in the fed funds rate. "The outlook...has weakened further," the Fed said in an accompanying statement. "Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth."

The cut in the Fed funds rate was actually less than what many pundits wanted, but salubrious nonetheless: Stocks soared and the credit-market gained much-needed traction. Fixed-rate mortgages improved dramatically across the nation. The benchmark 30-year fixed-rate mortgage dropped 41 basis points, to average 5.98%, while the 15-year fixed-rate mortgage fell 39 basis points, to average 5.46%, according to Bankrate's survey of large mortgage lenders.

Even homebuilders managed to maintain a stiff upper lip. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index for March remained at 20, still two points above the historic low of 18 reached in December. It wasn't the greatest news, but at least it suggests that things aren't getting worse.

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

Weekly Economic Recap

The Federal Reserve captured headlines again, as it tried to stave off another potential credit-market seizure. In this latest go-around, the Fed pledged to lend, in return for unsellable mortgage-backed securities, $200 billion of Treasury notes to banks and investment firms that trade directly with the central bank. The scuttlebutt suggests the Fed acted to save investment-banking behemoth Bear Stearns, which had been unable to secure credit against its massive portfolio of mortgage-backed securities.

These securities matter to Main Street as much as to Wall Street; they provide the source funding for the mortgage market, which is why Fed Chairman Ben Bernanke and his colleagues are trying mightily to halt a cycle in which the losses on mortgage investments cause banks to cut their lending, possibly sending the economy into a recession.

Unfortunately, the recalcitrant housing market isn't cooperating. Home foreclosure filings in February edged down from January, but were a whopping 60% higher than a year earlier, according to real estate data firm RealtyTrac. Unfortunately, the mortgage-backed securities market can't improve until the housing market improves.
And as for the recession, some believe the fight is over – and the Fed lost. Separate surveys by Bloomberg and the Wall Street Journal show the majority opinion believes we are in a recession. The opinion isn't without merit: The Commerce Department reported that retail sales fell 0.6% in February. The decline reflects a sharp slowdown in consumer spending, which accounts for more than 70% of U.S. economic activity, as Americans grapple with high fuel and food costs and declines in home values and other asset prices.

The good news is that inflation appears to have abated, which seems improbable given soaring oil prices. Nonetheless, it has. The consumer price index showed no increase in consumer prices for February. The benign CPI reading gives the Fed wiggle room to again cut interest rates – a likely event after Tuesday's Federal Open Market Committee meeting (where the Fed sets the federal funds rate).

Eric P. Egeland
RE/MAX ADVANCED
847.337.7090
HomesInBG.com

Weekly Mortgage Recap

An old saying declares that every cloud has a silver lining. After last week's torrent of miserable news, one can be forgiven for questioning the sanity of the saying's originator.

Let's start with the heaviest downpour: According to the Mortgage Bankers Association, more than 2% of the nation's 46 million mortgage loans were in the foreclosure process in the fourth quarter of 2007, with 0.83% of loans entering the process during the quarter. Both figures are the highest they've been in 35 years.

What's more, neither figure is likely to improve soon. The delinquency rate for home loans hit 5.82% in the fourth quarter, up almost a quarter percentage point from the previous quarter and the highest since 1985, when the rate topped 6%. The latest increases affected all loan types, but were most pronounced for subprime, adjustable-rate mortgages (no surprise).

The data explain the growing attention paid to proposals aimed at encouraging lenders to write down the value of troubled loans. "Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure," commented Federal Reserve Chairman Ben Bernanke. With low or negative equity in their home, a stressed borrower has less ability – because there is no home equity to tap – and less financial incentive to try to remain in the home, so the reasoning goes.

It's a tough sell; the last thing lenders want now is to become ensnared in an uncontrollable, morally hazardous spiral of debt forgiveness.

Meanwhile, the number of people who can afford houses has decreased. Payrolls fell by 63,000, the biggest drop since March 2003, after a decline of 22,000 in January, the Labor Department reported on Friday. The jobless rate also declined to 4.8%, reflecting a shrinking labor force, as more people gave up seeking work.

The silver lining in these pessimism-heavy clouds is that prime-mortgage rates reversed course and dropped, with the 30-year fixed-rate mortgage averaging 6.32%, the 15-year fixed-rate mortgage averaging 5.79% and the five-year Treasury-indexed hybrid adjustable-rate mortgage averaging 5.72% last week, according to Bankrate's weekly survey. (But even this lining is tarnished; Bankrate admits rates spiked after collecting its data.)

Eric P. Egeland
RE/MAX ADVANCED
847.337.7090
HomesInBG.com

Weekly Mortgage Recap

Inflation, it's safe to say, is the credit markets' number one concern. And why wouldn't it be? Last week, the consumer price index exceeded most economists' expectations, and this week the producer price index did the same, except it blew past expectations. On that blustery front, the PPI increased 1%, more than double the consensus estimate, while the core PPI, which excludes food and energy, increased 0.4%.

Federal Reserve Chairman Ben Bernanke further fanned inflationary flames when he told Congress that the Fed will do whatever it takes to stop the credit squeeze – the result of turmoil in the mortgage-backed securities market – from becoming a recession. In short, the Fed has essentially shifted gears from maintaining price stability to maintaining economic growth – a legitimate shift, to be sure, considering that gross domestic product slowed to a snail-like 0.6% pace in the October-to-December quarter.

But perhaps the Fed should be as concerned with price stability as the credit markets are. The most-followed inflation indicators have all hit new highs in recent weeks: Oil has surged to $102 a barrel (as recently as September it was $70), gold has surpassed $970 an ounce, the Euro has broached $1.50 for the first time, and many commodity prices have hit record highs.

Unfortunately, oil, gold, et al. haven't been moving higher alone; mortgage rates have been moving higher too. In the past two weeks, rates across the board have shot up 50 basis points (half a percentage point) or more. Freddie Mac's latest survey has prime, conforming loans averaging 6.24% on the 30-year fixed-rate mortgage, 5.72% on the 15-year fixed-rate mortgage, and 5.43% on the five-year Treasury-indexed hybrid adjustable-rate mortgage. The good news is that rates are still lower than they were this time last year.


Eric P. Egeland
RE/MAX ADVANCED
847.337.7090
HomesInBG.com

Illinois Radon Law

Beginning January 1, 2008 in Illinois buyers and sellers should be aware of the new Illinois Radon Awareness Act which applies to sales transactions for residential real estate. The law states that sellers must supply the buyer with two documents before the buyer will become bound on the contract to purchase the property. The first document is a pamphlet entitled “Radon Testing Guidelines for Real Estate Transactions”. The second document is a form that the seller will have to execute entitled “Disclosure of Information on Radon Hazards”.

Radon gas is a odorless, colorless radioactive gas that is produced by naturally occurring uranium in the soil. The gas raises from the ground into the air and into homes. Radon is the leading cause of lung cancer among non-smokers and about 1 out of 15 homes in the U.S. are estimated to have levels exceeding national safety standards. Although sellers are not required to test for radon or to reduce levels if they exceed national safety standards, buyers should be aware of this law and negotiate reasonable terms when purchasing residential real estate.

In addition to the new Illinois Radon Awareness Act, sellers have been responsible since 1996 for providing a Lead Paint Disclosure to the buyer. One thing that is not mandatory for the seller to provide is the home inspection report, but it is highly recommended. Home purchases are substantial investments and should not be taken lightly. Every buyer should receive the disclosures listed above and require a home inspection prior to purchasing a potential property. Not every buyer feels that a home inspection is necessary, but the minimal cost of a home inspection is well worth knowing the quality of the home and being able to enjoy it for many years to come.


Eric P. Egeland
RE/MAX ADVANCED
847.337.7090
HomesInBG.com

Weekly Mortgage Recap

The interest-rate party was fun while it lasted, but it appears to be over – at least for awhile. Depending who you ask and when you asked him, the 30-year fixed-rate prime conforming mortgage spiked as much as 41 basis points (according to Bankrate), or as little as 32 basis points (according to Freddie Mac). Either way, the 30-year benchmark is well above levels this time last week, and even this time last year, exceeding 6.4% in some markets.

The punchbowl was swiftly removed because of a rising threat of inflation. The Labor Department reported that consumer prices jumped 0.4% in January and are up 4.3% in the past 12 months, nearing a 16-year high. Even stripping out sharply rising food and energy costs, prices rose 0.3%.

The same day inflation reared its ugly head, the Federal Reserve disclosed that it reduced its forecast for economic growth this year to between 1.3% to 2%, half a percentage point below the level of its previous forecast offered in October. Fed officials blamed the decelerating outlook on slumping housing prices, tighter lending standards and higher oil prices.

Somewhat remarkably, housing eschewed its familiar role as red-headed economic stepchild. For the second straight month, homebuilder confidence rose, according to the National Association of Home Builders and Wells Fargo index of builder sentiment. The index increased to 20 in February, up from 19 in January. Disaggregating the index, sentiment increased to 24 in the Northeast, 15 in the West, 24 in the South and remained at 16 in the Midwest.

Perhaps the increased confidence resulted from an unexpected increase in new home sales, which inched ahead 0.8% to an annual rate of 1.01 million homes in January, and the fact that traffic in model homes picked up in January, according to the NAHB.

Eric P. Egeland
RE/MAX ADVANCED
847.337.7090
HomesInBG.com

Weekly Economic Recap

Scheduled economic news was scarce last week; actual economic news was another matter. Not surprisingly, the mortgage and housing markets garnered most of the headlines on what was reported.

To state the obvious, the economy's fate still hangs on the value of home prices. On that front, the news was discouraging. According to Zillow.com, a real estate data service, 39% of people who purchased a home two years ago owe more than they own. Adding insult to injury, Fannie Mae reported that it expects home prices will decline 4.5% this year and 2.6% in 2009.

Fortunately, more help is on the way. Congress passed an economic stimulus plan that raised the maximum loan sizes for some conforming and Federal Housing Administration-insured mortgages. The new conforming limit will vary by metropolitan area. In some places it will remain $417,000; in pricier areas, like San Francisco, it will rise to $729,750. Most of the country though will fall between these bookends.

Project Lifeline, a federal government and mortgage-servicer sponsored program for people on the verge of losing their homes, offers additional hope. Project Lifeline is unique in that unlike previous government programs, the benefits won't be confined to borrowers with adjustable rate mortgages. On the other hand, it will exclude anyone who is currently bankrupt, who hasn't missed more than three months of payments, or who is less than 30 days away from foreclosure. It will also exclude vacant or investment properties.

Eric P. Egeland
RE/MAX ADVANCED
847.337.7090
HomesInBG.com

US weekly Recap

For all the chatter about impending economic doom, it's amazing how the economy keeps plugging along. To wit, the Commerce Department reported that orders for manufactured goods rose 2.3% in December, following a revised 1.7% increase in November. The report is evidence that the putative economic slowdown has yet to hit America's producers of durable products.
All of America's producers – durable and otherwise – are producing what they produce more efficiently, as well. Worker productivity grew at a 1.8% annual rate in the final quarter of 2007, a faster-than-expected pace, which suggests productivity remains healthy and labor costs remain tame.

The productivity report provides the Federal Reserve with more wiggle room to continue lowering interest rates, if needed. And the Fed just might need to. The NAR's pending sales index posted at 84.9% in December, 24.2% below the 113.3 posted in December 2006. The NAR projects existing-home sales at 5.38 million this year and 5.60 million in 2009, with existing-home prices falling 1.2% to a median of $216,300 for all of 2008 before climbing 3.2% to $223,200 in 2009.

NAR chief economist Lawrence Yun predicts sales activity will remain soft through the first half of the year, but he hedges his prognostication by saying that the market could improve more quickly if the higher conforming loan limits are implemented sooner.

Eric P. Egeland
RE/MAX Advanced (Deerfield)
HomesInBG.com
847-337-7090

US Recap

The action came fast and furious last week, which was to be expected given the surfeit of news and data. Leading the charge was the Federal Reserve, which did what most pundits expected by lowering the fed funds rate another 50 basis points to 3.0%.

Fear of recession is the primary reason the Fed has been slashing the fed funds rate over the past two weeks, and the fear is well-grounded: Gross domestic product grew at a 0.6% annual rate in the fourth quarter of 2007, a palpable slowdown from the 4.9% pace in the previous quarter. The slowdown provided the Fed with the fodder for its aggressive response, which had been criticized by some observers as an overreaction to volatile markets.

Additional support for aggressive action was supplied by Friday's employment report, which showed that non-farm payrolls fell 17,000 in January, the first drop since August 2003. Gains in health care, retail trade and leisure were offset by declines in manufacturing, construction and financial services.

Of course declines in manufacturing, construction and financial services are tied to declines in new-home sales, which decreased 4.7% to an annual pace of 604,000 in December, the fewest since February 1995, and followed a 634,000 rate the prior month. For the year, sales dropped 26%, the most since records began in 1963, while the median price of a new home fell to $219,200 in December from $244,700 a year earlier.

HomesInBG.com

Deerfield Realty Report Jan. 18-26

Deerfield Real Estate Jan. 18-26 2008


Single Family Homes

Under Contract

• 1111 Park a 4bed 2.5bath home went under contract with a list price of $495,000

New Listings

• 1308 Somerset Ave. a 2bed 1.5bath $399,000
• 830 Cedar Ter. a 4bed 4.5bath $959,900
• 1363 Woodland Dr. a 5bed 5full 2half bath $1,949,000

Price Reductions

• 6 Price Reductions

Closed

• 1362 Arbor Vitae Rd. a 4bed 4bath closed for $429,000
• 1028 Hazel St. a 4bed 3.5bath closed for $1,101,050

Attached Homes

Under Contract

• 1220 Inverrary Ln. a 2bed 1.5bath $209,400
• 832 Swallow a 4bed 2bath $277,500

New Listings

• 1118 Inverrary Ln. a 3bed 2bath $175,000
• 382 Kelburn a 2bed 2bath $299,000

Price Reduction

• 1 reduction

Closed

• No Closings

Eric P. Egeland
Re/Max Advanced
847.337.7090

DeerfieldHomesOnline.com

BG Realty Report Jan 15-17th

Single Family Homes

-4 New Listings

• 275 University Dr. a 4bed 2bath $354,900
• 770 Silver Rock Ln. 4bed 3bath $364,500
• 982 Thompson Blvd. 3bed 2.5bath $379,900
• 2871 Dunstan Ln. 4bed 2.5bath $749,900

-4 Under Contract

• 681 Indian Spring a 3bed 2bath $329,900
• 968 Crofton Ln. a 3bed 2.5bath $338,800
• 918 N. Knollwood Dr. a 3bed 2.5bath $359,999
• 1421 Camden Ct. a 4bed 2.5 bath $429,900

-1 Price Reduction

-3 Closings

• 840 Silver Rock a 4bed 2.5bath closed for $319,500
• 572 Sycamore Rd. a 3bed 2bath closed for $350,000
• 440 N. Foxford Dr. a 4bed 2.5bath closed for $727,500

Attached Homes

-8 New Listings ranging in price from $149,000-429,000

-7 Price Reductions

-1 Pending

www.HomesInBG.com

Buffalo Grove Reports Jan 13 & 14th

Buffalo Grove Realty Reports for January 13th & 14th 2008

Single Family Homes

-2 New Listings

• 1417 Mill Creek a 4bed 3.5bath home listed for $439,900
• 69 Fabish Ct. a 4bed 2.1bath home listed for $450,000

-2 Homes under contract

• 930 Parker Ln. a 3bed 3bath with a list price of $449,999
• 321 Butternut Dr. a 4bed 4.5bath with a list price of $1,200,000

-4 Price Reductions

-1 Closing

• 440 Foxford Dr. a 4bed 2.5bath home closed for $727,500

Attached Homes

-3 New Listings

• 5 Oak Creek #3101 a 1bed 1bath $79,950
• 3 Villa Verde #309 a 1bed 1bath $108,900
• 1149 Miller Ln. #111 a 2bed 2bath $159,900

-3 Under Contract

• 658 Hapsfield #3D2 a 2bed 2bath $198,000
• 81 Le Jardin #81 a 2bed 1.5bath $220,000
• 14 Willoww a 2bed 2bath $269,900

-2 Price Changes

Eric P. Egeland

www.HomesInBG.com

Buffalo Grove Realty January 10-12th

Buffalo Grove Real Estate activity for January 10-12th

Single Family Homes
-3 Properties went under contract
-437 Navajo listed @ $250,000
-491 Checker listed @ $399,000
-54 E Fox Hill listed @ $419,900
-4 New Listings ranging in price from $329,900-$625,000
-5 Price Reductions
-505 Thorndale Dr. a 4bed 2.5bath home closed for $515,000

Attached Homes
-3 Properties went under contract
-974 Thorton listed @ $114,900
-1125 Miller listed @ $156,500
-330 Dogwood listed @ $229,900
-8 New Listings ranging in price from $75,000-275,000
-825 N. Grove a 2bed 1bath condo closed for $126,500


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

January 9th Market Activity

Market Activity for Buffalo Grove

Single Family Homes
-2 New Listings
-730 Shady Grove Lane a 4bedroom 2.5bath home listed @ $439,900
-2207 Miramar Ct. a 5bed 4bath home listed @ $769,000
-809 Thorton Ln. a 3bed 2bath home went under contract for $339,900
-994 Thompson Dr. a 4bed 2.5bath closed for $395,000

Attached Homes
-2 New Listings
-102 Steeple a 2bed 1.5bath listed for $169,900
-988 Hidden Lake a 3bed 2bath listed for $218,777
-3 Price reductions
-Nothing under contract
-2 Villa Verde #220 a 2bed 2bath closed for $138,750

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

Market activity for Jan 1-8th 2008

BG market updates for the 1st-8th

Single Family Homes
-142 Toulon a 4bed 3.5bath home went under contract with a list price of $499,000
-5 New listings ranging in price from $299,500-$695,000
-6 Price reductions
-488 Lauren a 4bed 2bath closed for $322,000

Attached Housing
-3 Properties went under contract ranging in price from $199,900-$319,000
-7 New listings ranging in price from $129,900-$299,900
-10 Price reductions (I guess some people were holding out to the beginning of the year to drop their price)
-4 Closings
-2 Villa Verde #220 closed for $138,750
-3 Villa Verde #215 closed for $130,200
-611 Hapsfield #303 closed for $178,000
-1284 Ranchview closed for $203,500


Eric P. Egeland
RE/MAX Advanced
847.337.7090
http://www.homesinbg.com/

Week Recap

The news last week was generally favorable for housing and lending, though you would hardly know it by the pessimistic spin applied by media commentators. For instance, sales of existing homes unexpectedly rose 0.4% in November to an annual rate of 5 million units, according to the National Association of Realtors. Unfortunately, the accompanying commentary was generally nuanced pessimistically in the media. In another example, orders from U.S. factories rose more than forecast in November. The 1.5% increase was the most in four months and followed a revised 0.7% increase in October, according to the Commerce Department. Nevertheless, the corresponding commentary generally mirrored that of a Lehman Brothers economist who said: “Manufacturers are becoming more cautious. We do think the next several quarters are going to be a prolonged period of weakness.'' There was genuinely negative news: Hiring in the U.S. slowed more than forecast in December and unemployment jumped to a two-year high, rising from 4.7% in November to 5.0%. That news was greeted with the obligatory, if not patronizing, “I-told-you-so” explanations. There are, of course, genuine economic concerns, as most of us are well aware. The point is to explicate that no matter what positive news is disseminated at this point, it's unlikely to be received favorably. Commentators are lagging indicators: They aren't going to presage the possibility of a housing or lending recovery until it is well under way.

Eric P. Egeland
RE/MAX Advanced
847.337.7090
http://www.homesinbg.com/bgblog