Are We Moving a Toward Rent Bubble?

As if you needed another indicator that now is the best time to buy Chicago real estate, the latest statistics show that home ownership is down, and rental demand is skyrocketing.  Apartment vacancy rates are the lowest they have been since 2006 at 5.6% and rents rose 2.3% over last year.  That certainly exceeds housing price increases in most areas, and seems to forebode a possible “rent bubble”.  Home ownership is down almost 1% since last year, and each 1% translates into one million new rental households.  So with demand increasing, and supply staying stagnant (few new multi-family building starts), rents are obviously rising.  If unemployment figures stay constant, and the weak economy continues. Rising rents will reach critical mass.  
 
The recent increases in apartment building values moved into record territory for the third quarter and rivaled the previous record set second quarter 2007, which was, at least in Chicago, just after the market peaked.  So the lesson in all of this is buy today!  Interest rates continue to be at record lows, Chicago real estate prices have started to increase and if you can qualify, now is the time to buy.  Multi-family properties good bets for both income and appreciation.

New Guidelines Coming To HARP

By December 1st, big changes are coming in HARP (Home Affordable Refinance Program) which could actually benefit those it was intended to help.  By easing the refinancing guidelines, potentially millions of homeowners might now be able to refinance their Fannie Mae and Freddie Mac backed mortgages and could save thousands of dollars annually, which the current administration hopes will flow back into the economy.  New guidelines now won’t exclude those who have lost the most of their home’s value.  Previous restrictions prohibited borrowers from participating if their home’s value had fallen to an excess of 25% of their mortgage balance. 
 
http://bottomline.msnbc.msn.com/_news/2011/10/24/8470326-a-guide-to-administrations-new-mortgage-refi-plan

New Solutions for America’s Housing Crisis

We recognize that without a healthy housing market, it may be next to impossible to climb out of our depressed economic status.  The housing market accounts for 20% of the US GDP.  Here is a blog post from J. Lennox Scott, one of the U.S’s largest real estate  brokers from Oregon.  A third generation Realtor, his company John L. Scott Real Estate, has 93 offices with about 2,600 agents. 

John has testified before a U.S. Senate committee and lobbied the federal government for policies to support the ailing housing market. He also authored a paper outlining the National Association of Realtors’ proposals for righting things.  Here is a link to his blog post about concrete actions to start us on a solid housing recovery.

http://lennoxscottblog.com/2011/10/18/new-solutions-for-americas-housing-crisis/

Debt Reduction For Troubled Chicago Homeowners

Frustrating news for troubled Chicago homeowners.  The good news is that there is debt relief from federal and state sources.  The bad news is that Fannie Mae and Freddie Mac will not participate in these programs.  No loans are eligible for these programs if they were bought and held or securitized by Fannie or Freddie, both of which are now under government control and guarantee more than 70 percent of the country’s home loans. Edward J. DeMarco, acting director of the Federal Housing Finance Agency oversees Fannie and Freddie, and believes that principal reduction is bad business, and since both agencies are now “owned”. 

Likewise, FHA and VA loans are also exempt from any debt reduction relief.  Although debt reduction loan modifications have been shown to be more successful than mortgage payment loan modifications, there is a moral hazard that would be created by wider acceptance of the debit reduction modifications.  If I paid $400,000 for my house and am making the payments and keeping current, and you paid $400,000 for your house next door, but are able to reduce your debt by a loan modification, how happy will I be?  Are we risking the entire “promise to pay” system by extending debit reduction modifications?  Perhaps a grace period with a defined expiration date would be the answer. 

Read this article for more info:
http://www.nytimes.com/2011/10/06/business/opposition-from-freddie-and-fannie-stalls-debt-reduction.html?_r=2&ref=todayspaper

Mortage Rates Below 4% For Chicago Home Buyers

More good news about mortgage rates and monthly housing affordability for Chicago home buyers.  When we bought our home in 1987, the 30 year fixed was 10%.  Within two weeks time, there was a “correction” between the dollar and the yen, and the 30 year fixed rate went up almost 2 percentage points.  We wound up with a 5/5 ARM at 10%.  Today, our 30 year fixed rates for new Chicago home purchases can be under 4% with 25% down!  For a clearer picture of what this means for you, see the following article:

http://www.marketwatch.com/story/mortgage-rates-plunge-beyond-expectations-2011-10-05?siteid=nwhpf

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