8 October 2009 ? Former 3rd Ward Alderman Dorothy Tillman played an integral role in opening Bronzeville’s Harold Washington Cultural Center in 2004, which relied on $7.7 million in public grants and employed Tillman’s daughter as its executive director. Shore Bank recently filed a foreclosure suit against the center in an effort to recover almost $1.3 million owed by the center. Tillman envisioned a revitalization of the 47th street area to its role as the “Chicago Blues District.” While efforts are underway to resolve the issue between the bank and the center, City officials have started investigating alternate uses of the building, which is currently available for use by artists and community groups. In the first half of the 20th century, the strip along 47th street was a hot entertainment spot for African-Americans, but the revitalization effort has slowed with the weak economy and Tillman’s defeat as alderman in 2007.

01 September 2009 ? It is no secret that the housing market is a very larger driver of the economy. As we see some rebound in the housing market some are getting out there and testing the waters again. Here are a few neighborhoods that have held steady in this declining market:

One bedroom condominiums in Roscoe Village have not declined from 2007/2008 period as compared to 2008/2009. The median price point in Roscoe Village for a one bedroom has held steady at $240,000. The same can be said about two bedroom/two bathroom condominiums in the “True” Gold Coast. Although the market has declined approximately 2.82%, it is holding steadier than areas like Beverly on the south side of Chicago. Single family ranch and bungalow-style dwellings have declined approximately 42% from last year to this year. The numbers are significantly different. The question remains, are we really out of the woods and why are some areas holding steady while others are seriously declining?

The Good News

Chicago's Air and Water Show will also be going up and down all weekend

As we reported two days ago, Chicago and Illinois are on a roll; we’ve had five consecutive months of increased month-on-month home sales. It turns out that we are not alone. Many news outlets are reporting that home sales grew in the second quarter in the majority of the country: 39 states saw housing sales increasing a combined total of 3.8% over the first quarter of this year. However, these numbers are about 3 percent below last year’s numbers. Idaho, Hawaii, New York, Wisconsin and Nebraska are doing quite well with 20 percent or more increases in sales. On the other end of the scale, Alaska, Wyoming, California, Colorado and Michigan have all dropped by at least 6 percent.

Bad News #1: Housing Prices are Down

Nationally 129 out of 155 metro areas have seen price drops with the median sales prices down almost 16 percent when compared to last year. Fort Myers, Florida was hit the hardest with prices down 53 percent. Other big price losers are Phoenix and Las Vegas. However, there are cities that are seeing price increases: Davenport, Iowa saw 31 percent increases and Cumberland, Maryland saw 22 percent.

Bad News #2: Housing Foreclosures are Up

More than one third of all sales in the second quarter were of foreclosures or distressed properties. Foreclosure tracking company RealtyTrac Inc. is reporting that one out of every 355 homes (a total of 360,149) received a default or auction notice or were seized last month. That is the highest the company has seen since it began keeping record in January 2005. This is the third record-breaking month they have seen in the last five months.

Economists Upbeat

National Association of Realtors® chief economist, Lawrence Yun is quoted as saying that the sales increases are, “a hopeful sign for the economy.” More and more economists are saying that the worst of the real estate recession is behind us even though foreclosures will likely continue to rise for the next year.

We’d like to thank cikaga jamie for sharing today’s photo via the Creative Commons License.

10 August 2009 ? The impact of the conditions of the local real estate market is one of the a largest factors to the growing budget deficit of the City of Chicago. With a projected shortfall for the overall budget in 2009 to exceed $300 million dollars, the mayor?s office is predicting a greater number for 2010. According to the City of Chicago, property sales contributed  approximately $250 million to the city?s revenue via  the transfer tax at the height of the market in 2006. This tax totaling $10.50 per  $1,000 of purchase price($7.50 by the buyer, $3.00 by the seller) paid at the closing of each real estate transaction is estimated to bring in only $55 million in 2009. The city is only budgeting $53 million for 2010. The concerns all  Chicago Realtors®, residences and business should have is where the city will be looking to make up this shortfall.

3 August 2009 ? Today the mortgage backed bonds opened down 28 and continued to slide and are now currently down 59 bps. Last week we had a good rally with bonds as reported in the daily update and on Friday we hit a level of resistance which basically predicted this downturn this morning. The ISM index number came out  at 48.9, which is better the expected number of 46.5. A reading over 50 would indicate the economy is getting better so while this number improved, it still does not paint a rosy picture. Former Fed Chairman Alan Greenspan commented that the recession is almost over which sparked a rally in the stock market, putting additional pressure on the bonds. Today?s 30-year rate for the well qualified buyers of single family homes with an LTV of 60% would be 5% (assumes $350,000 loan amount or greater).

The economy is still leaning against the ropes. People are tightening their belts to buckle down for the next few quarters. And, now people are talking about the insurance industry giants, such as State Farm and Allstate, ?sucker-punching? their customers.

Double Digit Home Owners’ Insurance Rate Increases

Sunrise on higher insurance rates for most Chicago home owners

Allstate was the first to announce last month that their homeowners rates will increase by 17.3% for all of it customers. State Farm is now following suit and are hiking their rates by 13%. As I glance over the many other insurance companies also requesting to increase their home premiums by double digits, it’s safe to say that the insurance industry is barreling toward a hard market?no questions asked.

The insurance industry is similar to Wall Street?this cycle of growth and decline exists everywhere?the rates go up and down over time. The reason that this news is so disheartening is that the timing couldn?t be worse. We have just emerged from the longest soft market cycle in recent history. A soft market is when insurance premiums are low and companies are actively competing to write as much business as possible. Insurance underwriters allowed the homeowner to have numerous claims, high limits of coverage, flexible policies, and still qualify for the lowest rates. The insurance companies did this for a simple reason: to win market share.

Of course, the soft insurance market is a great time for both the homeowner and insurance company. However, when the insurance companies themselves get too lax and careless, problems begin. This false sense of security leaves companies unprepared for when the insurance market turns towards a hard market.

A hard market is simply the opposite of the soft market: coverages are now limited or even eliminated, underwriting guidelines are more stringent, and the insurance premiums begin to rise dramatically.

There is no one reason that causes a shift to a hard market

The current hard market seems to be driven by the demands of the reinsurers whom started losing millions of dollars with the terrorist attacks of 9/11. One may ask, ?What do terrorist attacks in New York have to do with my homeowners policy in Chicago?? And the simple answer is a lot. Reinsurance carriers provide the insurance policies for insurance carriers such as State Farm and Allstate to provide protection from hurricanes, earthquakes, flood lawsuits, etc. In recent memory, there has been billions of dollars lost, coast to coast, and now the reinsurance carriers who are losing money are now raising the annual premiums they charge insurance companies, which in turn trickles down to the homeowner.

What Can I Do?

As I tell my clients, now more than ever, you want to be taking a proactive approach to protecting your investments and assets. Know what insurance company is covering your property. Are they financially sound? What is their A.M. Best rating? Get to know the agent that sold you the policies, make sure they clearly explain your coverage AND limitations. Make sure your agent understands your concerns and make sure they are addressed. If your agent can?t provide these basic levels of support, team up with a competent independent insurance professional who will help you understand and navigate this hard insurance market?they have the tools and resources to smooth out the cycle.

Slowness Can End in Disaster

In March 2008, Fannie Mae entered into an agreement with The Federal Housing Finance Agency (FHFA). This agreement was set up to adopt certain policies relating to appraisals for mortgages. Starting May 1st, 2009 the Home Valuation Code of Conduct (HVCC) came into effect for Fannie Mae and Freddie Mac purchased loans.

HVCC Means Only Third Party Companies Can Order Appraisals

The code states that all appraisals must be performed by a Certified Appraiser. It also states that no employee, director, officer, or agent of the lender, or any other third party, on behalf of the lender, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, and or bribery. Therefore, independent third party companies will order the appraisal and have contact with the appraiser.

Where Did HVCC Come From?

Some of the reasons for the HVCC going into effect are due to appraiser’s being pressured into pushing the value on the property in order to make the deal go through. In the past appraiser’s have reported bribery, threats of job loss and so forth. This was one of the reasons the country is in the financial trouble it is in today. In some cases appraisal values were pushed higher in order to ensure that the appraiser continued to receive job orders from certain lenders.

There are two sides to every story. With the HVCC in effect, getting a mortgages has become a much more difficult process. It’s not unheard of to have three appraisals ordered for one property, and thereby increasing the cost of the loan. The length of the underwriting times has increased from 30-days to sometimes 60-days. These time lines are critical to some buyers’ due to being locked into a certain interest rate. Even a 45-day underwriting time can cause a deal to fall through. Real estate agents  and mortgage brokers are blaming the HVCC for holding back the economy.

Appraisers Use Only History…Can’t Predict the Future

There is also concern that the market is turning around and that appraiser’s are keeping the market from turning. Appraiser’s can only report on historical data. They cannot predict the future. With today’s new lending laws, appraiser’s are required to include three closed sales within the previous three months, as well as one pending sale and one active listing, all within the subject’s marketing area. In theory, this is tough for an appraiser when the market is at the bottom and on its way back up. When the market is on its way back up, the appraiser does not have the historical sales to support the values. The only way for those values to be supported is if the buyer paid cash for the property. This results in the HVCC becoming an albatross around the neck of the economy.

26 June 2009 – Mortgage-backed bonds opened down 1 this morning and remain flat. The savings rate soared to 6.9%, which caught many by surprise; this is the highest level since 1993 and stocks are reacting negatively to this news that consumers are keeping their money in savings. This may impact the pace that the economy recovers as consumer spending is a key factor for recovery. Are we now following our parents and grandparents in building up our savings and paying off our homes? The Dow is currently down 56. The market should remain quiet being a Friday with no other news coming out.

The New York Fed purchased $20.29 billion of the bonds, mainly of 4.5 to 5%, bringing the total of $570 billion. Again, the government will continue to buy mortgage-backed bonds to keep interest rates at historic lows. If you have not taken advantage of these rates, consult your mortgage professional to weigh your options.

24 June 2009 ? Mortgage backed bonds opened down 6 this morning and continued to trend down to -16. The 30-year and 15-year mortgage rates are priced off of mortgage backed bonds, not the 10-year Treasury bonds as many consumers mistakenly believe. Stocks rose after an earlier report from the Commerce Dept. showed orders for durable goods unexpectedly jumped 1.8 percent in May, indicating business investment was starting to stabilize. This is opposite of Monday?s news concerning the World Bank which stated that the Global Economy will take longer to recover. So basically you have an up and down market with interest rates varying daily as the news reports come in. New Home Sales came in lower at 342,000 versus the expected 360,000. However, May sales are up month-on-month in Chicago. The pressure on new home sales comes from existing resales of foreclosures where many bargains can be found by today?s consumer.

One tip for today, when buying a condo in today?s market the FannieMae (FNMA) guidelines now have risk-based pricing if you do not put 25% down on the condo. What this means is that you will have a slightly higher mortgage rate?typically an additional .25%. Today?s 30-year fixed rate is at 5.25% but we may see it hit 5.375% if the bond market continues to slide.

23 June 2009 – Eddie Bauer joins Circuit City, Linens ‘N Things, Mervyns and other retail chains that have filed for bankruptcy court protection as consumer spending has fallen and the recession continues. Last Wednesday, Eddie Bauer, best known for it’s outdoor clothing line filed for Chapter 11 bankruptcy. Eddie Bauer considered a reorganization, sale, or liquidation through Chapter 11 bankruptcy protection as it continued operations under a modified business plan. However, it now hopes simply to be sold. This is yet another sign of the continued recession and that the economy has likely not hit bottom. No one knows what will happen to Eddie Bauer‘s prime real estate location on the Magnificent Mile. According to CB Richard Ellis Inc. data reported by Crain’s, the toney shopping street was already suffering from its highest vacancy rate in the past ten years of 7.2%.