This week several statististics on the state of the Chicago real estate market came out and all of them paint the same picture: the real estate market is still weak.

First there was the Case Shiller index which indicated that home prices in the Chicago area fell once again in March. They are down 18.6% year over year and down 27.4% from the peak in September 2006.

Then the Illinois Association of Realtors came out with the sales statistics for April. For the third year in a row sales are down more than 20% from the previous year:

I also pulled down the quarterly sales statistics for the city of Chicago from the Chicago Association of Realtors and it shows the lowest level of sales since the 1995 – 1996 time period:

You can always get the latest version of these and other housing market statistics on our Chicago real estate market trends page.

A couple weeks ago, the NAR made an announcement that the $8000 tax credit could be used as the down payment for FHA loans.  Some opined that lenders would provide a “bridge loan” for the down payment.  Unfortunately, this was rescinded.  Currently, the funds are only available in the form of a tax credit, which entitles first time home buyers a refund on their 2009 taxes (claimed in 2010).

There are several hypotheses as to why it was rescinded.  The first is that law makers believe buyers should have some of their own money invested in the property.   They believe that one of the factors that led to the sub prime meltdown was 100% financing.  When a buyer has their own money invested in a property, they may be less likely to default.  Currently, FHA requires a 3.5% down payment.

The second reason seems to rest on the “bridge loan.”  While in theory, the loan seems safe to the lender, because the IRS is paying the tax credit.  However, they questioned how they would get reimbursed  after the buyer received it.

In the end, it was rescinded.

There have been rumors that third party non for profits like NACA may somehow get involved.

Nonetheless, the $8000 tax credit is still a HUGE incentive.

As we all have just experienced, the rules are changing at a torrid pace, sometimes daily.  It is essential that we all stay up to date so we can provide the best customer service.

If you have any questions you can contact Marc at marcj@aandnmortgage.com.

According to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment on the purchase of a new home.  He shared this information at midyear legislative meetings held in Washington D.C. on Tuesday.

Up until now, home buyers were only able to obtain the credit at tax filing time.  The goal of this change is to allow the FHA home buyer to have upfront access to funds when they close on their home.  By permitting this ”early” credit, many more people will be able to purchase homes.  It also may mean people can spend more on their new home as a result of having up to an additional $8,000 for their down payment.  Saving a down payment is often the challenge of the first time home buyer.

Eligible home buyers will be able to access the funds immediately at the closing table because FHA’s approved lenders will be permitted to monetize the tax credit through short-term bridge loans.

While this attempt to further stimulate the market is a valiant one, it may mean that irresponsible buyers could simply use that tax credit to buy the home, default on the mortgage without ever have invested a dime of their own money.  Unless the use is still restricted on a certain percentage of the money for purchase comes directly from a buyer’s bank account. 

The restrictions/limitations on this new plan have not yet been published.  I will follow up when the details are publicized.

Just updated the employment picture for the greater Chicago area and it’s not pretty. Essentially all the growth of the last decade has been wiped out and the unemployment rate is the highest it has been over that decade. Of course, the housing stock was built (and continues to be built) for employment levels we never achieved. It’s no wonder that housing prices have been on the decline and that we’re starting to see some rational sellers capitulate on this point.

There are now over 350,000 fewer jobs in the Chicago area then at the peak in 2007. We are approaching decade lows and are already lower than we were 10 years ago.