Monday, August 10, 2009

OPPORTUNISTIC BUYERS ARE SHOPPING FOR DISCOUNTED HOMES AND CONDOS

Roll together four months of housing sales gains, rock-bottom mortgage rates, and the Dow Jones average topping 9,000 on some solid corporate earnings reports and suddenly optimism is returning to the home-buying and investment world.

At the end of July, Freddie Mac reported that 30-year fixed-rate mortgages averaged 5.25 percent, up slightly from 5.20 percent a week earlier, but still less than a half point from recent record lows. Last year at this time, the 30-year fixed loans averaged 6.52 percent.

“The Federal Reserve noted recently that entry-level homes continued to perform relatively well in part due to the first-time home buyer tax credit,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Other economic reports confirm that the housing market may indeed be bottoming out.”

New home sales rose for the third consecutive month in June to an annual pace of 384,000 homes, the most since November of 2008 and the number of new houses on the market fell to the lowest amount since February of 1999, according to the Department of Commerce.

Sales of existing homes also showed a three-month gain to 4.89 million, the most since October 2008, and the share of distressed homes fell to 31 percent compared to almost half at the beginning of the year, the National Association of Realtors (NAR) reported.

Despite the good news, sellers still are wrestling with soft housing resale values. Bargain-hunting home and condo hunters are shopping the market, itching to lock in prices that are marked down $75,000 to $1 million or more, depending on location and quality of the real estate, Realtors say.

Resale values of luxury homes on the North Shore and suburbs such as Barrington appear to be undergoing the largest adjustment. The North Shore-Barrington Association of Realtors reported that only 572 homes in its service area sold for more than $1 million last year, down 39 percent from 935 homes sold in the peak year of 2005. Through the first half of 2009, only 154 homes have sold in the $1-million category.

For single-family home shoppers in Chicago, C.A. Development has unveiled a summer “Home Buyer Stimulus Program” which offers drastic discounts of up to $300,000 on model homes at Mayfair Crossing and the Residences of Old Irving Park on Chicago’s Northwest Side.

For condominium buyers, “$100,000 price reduction special” now being offered on a 2-bedroom, 2-bath loft at Prairie District Lofts, 1727 S. Indiana Ave. in the South Loop. The 1,414-square-foot duplex is priced at $299,800, marked down from $399,800, according to David Silverman, agent for Weichert Realtors, Frankel & Giles.

New condo shoppers can save from $75,900 to $84,900 at a developer closeout on 61 immediate-occupancy condominiums at Catalpa Gardens Condominiums at 1122 W. Catalpa Ave. in the Edgewater neighborhood, said developer Charles L. Cornelius, Jr., a partner in Catalpa Partners, LLC.

One-bedroom, 1-bath units with about 660 to 803 square feet are priced from $119,500, down from $199,900. Two-bedroom, 2-bath residences with 1,054 to 1,408 square feet are priced from $208,500, down from $284,400.

Economic analysts have said the wide-spread real estate price adjustments were caused by America’s financial system melt down which was sparked by creative financial innovations such as subprime mortgages, credit default swaps and collateralized debt obligations. President Obama said some institutions haven’t learned lessons from the financial crisis and feel no “remorse for taking all these risks.” A shocked Obama was reacting to second-quarter profits at Wall Street firms including Goldman Sachs and JP Morgan Chase—two investment firms that received taxpayer bailout funds.

Meanwhile, hoping to help American homeowners struggling with the threat of foreclosure, Uncle Sam has created federal programs aimed at modifying loans, but critics say the plans are not working.

As a result, the Federal Reserve Board has proposed new disclosure rules to highlight the risky features of mortgages and home equity loans, such as adjustable rates and prepayment penalties.

Under the new rules mortgage brokers and loan officers also would be prohibited from receiving bonuses for steering borrowers into higher cost loans.