Interest Rate Hikes, Local Inventory Levels, and Subprime Fraud Lip Service

Yes, the picture to the left is as accurate a depiction of how us real estate folks feel after the week we just endured.

Let's see what I can isolate as the 3 biggest issues that have come onto my radar screen for this second week of June...

Mortgage interest rates. UP, UP, and AWAY!!!

UP to 6.5 percent for conforming mortgages this week, even as high as 6.75% at one point. Good luck getting that quote to stick for more than a couple of hours.

UP again, for Jumbo Mortgages (over $417,000 of loan amount), reaching as high as 8.675 or higher. Jumbo's affect the luxury housing market in Chicago's far western suburbs, the Tri-Cities of St. Charles, Geneva and Batavia, certainly. They also affect modest dwellings in the nearer suburbs, like Oak Park or Arlington Heights (to stab blindly), where prices are substantially higher. The crowd of buyers that can afford a half-million dollar mortgage at close to 9% interest is an understandably small one, and they expect a lot more for their money nowadays.

Rates have been attributed to tough talk about inflation from the U.S. Federal Reserve. As I look at overall economic news, I start to wonder if housing isn't a small problem in the macro-picture. It seems that Ben and friends thought the same thing, and it caused a small ripple in the mortgage bond market, as concerns that bond values would drop in the face of higher rates (impacted by rate hikes at the Fed) over the next few months.

And AWAY! Away with mortgage perps'. Good to see that they've nabbed every last mortgage fraud'ster. 400 of our "finest" real estate practitioners were hauled off to jail for inflating stated incomes, misleading values or uses for properties, and other fraudulent tactics used to secure for loans. As the AP line depicts, the real victims in the subprime mess is "consumers" and "lenders." Consumers are the everyday folks who never fibbed on their stated incomes, source of funds (gifts depicted as savings, etc.), or never really heard or understood that their loans were adjustible. Lenders, we are told, were blissfully unaware of the sources of their record crushing revenues. The next step is arresting oil company executives, and then our ever-benevolent government will likely give us free gasoline out of the goodness of their hearts.

Looking at the data for housing inventory levels, locally, I am not yet inspired to announce the end of the housing downturn. Taking a closer look at our months' supply of inventory in the Tri-City area, you'll note that we are well above last year's inventory level, caused by fewer sales and more homes listed for sale. Foreclosures, of limited importance last spring and summer, are taking a heavier toll on the local market, along with short sales. Failed rehabs and new construction gluts, however, are far less prevalent this time around.

One, Two, maybe Three Items for Your Review...

When I first started clicking off rather incidental messages on Twitter.com I didn't see how it would really apply to a Realtor. A mortgage lender, sure, or a high school student, TOTALLY, but what is there for me to offer that would really seem relevent to the public? It took me a little while, but I think I know what it is. HOTSHEETS. The number of homes that have come onto the market, reduced price, gone under contract, cancelled/expired from the MLS, or closed, is actually a very base way to tell the direction of the market. For me, it's actually helpful to spit that kind of data out more often, and for the reader, I think it's in the same ballpark as the graphs that I try to showcase here on a weekly basis. If you live in the Tri-City or Fox Valley area, you might find that this is something worth watching.

NEXT. Interested in moving to Morrocco? As a Baird & Warner agent who has had many properties featured in the Luxury Portfolio Fine Property Collection, this caught my eye this week. It's not my listing, fyi.

LASTLY. Do you use Realtor.com for your casual property searches? Well, I happened upon a very fresh podcast from NAR's CEO, Dale Stinton (my childhood best-buddy's dad, as odd as that sounds. That's a true fact.). Go here to see a sneak peak at The New Realtor.com.

Property Taxes: Fight the Power

If you live in Illinois, but not in Cook County, then if you don't have your property taxes, by now, then you must either:

1. Escrow your taxes and insurance through your mortgage lender
   
   OR
   


2. Be a Lessee

If you aren't a member of the latter group, then you are probably interested in paying as little taxes as possible. Unfortunately, the revulsion that we feel when we receive our tax bill is not very useful: This is NOT the time to appeal your taxes. Even so, some facts about how property taxes are determined surprise many-a-taxpayer.

For instance, as the Beacon News pointed out in their piece "Property Tax Bills Causing Concern," the present market value has very little to do with the "Assessed Market Value" of your home. In fact, the county utilizes an average over the past 3 years to determine your tax amount.

I have noted for years, however, that tax bills were terribly outpaced by appreciation during the boom years. They were guaranteed to go up because they were typically 5-10% lower than market values. Now that property values have slid downwards, they are now looking as much as 5% too high.

The moral of the story, however, is that most townships finish their assessments right around the holiday season. So the next time you start getting out Halloween decorations, instead of looking forward to Thanksgiving and Christmas, start thinking about what your property taxes will eventually be. And FIGHT THEM. If you're unsuccessful, it will at least make for more realistic holiday shopping!

Comparing the Counties

Last month we compared areas from the interior and collar counties as to the level of housing inventory. This month, we'll generalize to gather as broad a trend as possible (and avoid comparing cities that are the exception to their area's "rule"). Additionally, we are removing New Construction homes from the equation. Not because new construction home sales are in any way not significant, but because builders often enter vacant land as built homes for sale - they are casting as wide a net as possible right now. We refer to some of these listings as "phantom listings," as they are not really properties "on the market." The vacant homes for sale are an important factor in this market, but the distortion is greater than you would ever expect.

Cook County

DuPage County

Kane County

DeKalb County

Starting in Cook County, we have gathered information along the Union Pacific West Metra Line, or going West, with DuPage, Kane, and DeKalb Counties. Tomorrow we'll contrast this data with the Northwest and Southwest suburban areas.

What's interesting about this data, is that ACROSS THE BOARD these counties have halved the total inventory level highs from this past December. These levels, however, have not receded to last year's lows, which were in March and April. It should definitely be noted, with this snapshot of the market's health, that by broadening the scope of examination, we are also amalgamating such areas as the Gold Coast with the east side of Elgin, or Northwest Aurora with downtown Geneva.

Stay tuned for tomorrow's data.

Showing Activity as Leading Indicator for Sales?

Before a home sells, it must be shown. I dare you to try and dispute that fact.

As real estate brokerages arrange appointments for buyers agents to show listed homes to their clients, they create data. ShowingTime.com, known to agents as "ShowingDesk," is the premier online service provider for setting appointments. It is used by my broker, Baird & Warner, along with 40 other brokerages - from the big national brokerages to the independent regional ones. The data recorded for each appointment is logically one of the best indicators of market sales activity, as the more a property is shown, the more likely a buyer will write an offer, and the more likely that agreeable terms can be found, leading to a visit to a closing table.

I track my office's showing activity (above), in addition to online views of each individual property's webpage. In comparing this with a given property's number of showings, I can gauge how well a property is doing, relative to other indicators. ShowingTime.com offers us a snapshot of the nation-wide sales picture, by comparing the percent increase or decrease of showings, and the published record of closed sales. Or, at least, in theory.

If we are to believe the suggestion of ShowingTime.com's graph, then the upsurge of showing activity in March should have yielded a very positive April for home sales. While there was a definite increase (see graphs below), there is another trend represented in ShowingTime's graph: More showings per buyer. This is a definite trend in the marketplace, as buyers take more time to decide the right home for themselves. A buyer can see more houses, and have less worry over their "favorite" getting sold out from under their noses.

The data above, taken from Kane County, IL, includes April's sales number for Under Contract and Closed properties (both detached and attached residential housing). It does reflect an increase in the number of properties sold, but those numbers reflect a decrease as compared with last year's seasonal figures. April 2007 sales in Kane County amounted to 552 Closed properties, while April 2008 yielded 339. The number of properties that have gone under contract in April (606 in '07, 506 in '08), will inevitably revise downwards as transactions under contract fail to result in a closing (due to home inspection, mortgage financing, or other problems encountered).

It seems as though ShowingTime's March report reflects the dispositions of buyers towards a more thorough and deliberative home search, and not a surge indicating housing's recovery by summer time. An uptick, yes, but comparing year-over-year data gives us the whole story. There may not be any dispute to this post's leading statement, but plenty is left to argue for ShowingIndex's direct correlation to sales activity.