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
Sunday, July 27, 2008
Monday, July 14, 2008
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
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
Thursday, July 3, 2008
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
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
Tuesday, June 10, 2008
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. EgelandRE/MAX United
847.337.7090
HomesInBG.com
Thursday, June 5, 2008
Just Listed in Old Farm Village
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Central A/C
Eric P. Egeland
RE/MAX UNITED
847.337.7090
HomesInBG.com
Wednesday, May 7, 2008
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
Tuesday, April 29, 2008
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
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
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