2009 Predictions Updated

My 2009 Real Estate Predictions-Updated and Revised June 4, 2009

In the Naperville area we've been in a real estate depression since April 1, 2006. That's over 2.5 years! So, what's different in 2009?

1) Good News! With the incoming administration's zeal to get both the housing and stock market in a recovery mode, we'll see enticingly low mortgage rates. They could even get down to 4.5%. If they do, I'll be refinancing too. And, there's a 15 year no-interest loan of $7500 (payable at $500 per year) available to buyers until June, 2009. We could get other programs. I bet we do!

Interest rates got down under 5% in April and May and yes, lots of refinancing according to my mortgage people. Better yet the first-time buyer credit was changed to $8000 without any repayment requirement. And, HUD just released a letter saying that the $8000 could be used as additional down payment or for closing costs. At present this deal will end December 1, 2009.

2) Bad News! You'll need to have a really good credit score (FICO) to get these low mortgage rates. Many lenders are using a tiered rate plan. If your FICO score is above 750, you get the best rate, (but, call around and check with at least three lenders, as they all have different standards). If your FICO score is above 680 you'll still get a good rate. If your FICO is below 680, then you'll need to consider an FHA/VA loan. If your down payment is less than 20% you'll also pay an additional mortgage insurance payment. And, there are ways to improve your credit score...but, they will take time. Do make sure to check your credit report annually at www.annualcreditreport.com. You can do this online now.

Nothing has changed here, except the underwriters are checking out everything!

3) The first quarter of 2009 will be rough as unemployment zooms up to 9%, and many people are laid off or let go as businesses close their doors. Expect several big name retailers to call it quits. Foreclosures will continue to increase and those people without jobs can no longer make their payments. Sadly, almost 50% of the properties that had loan modifications in early 2008 are once again heading into foreclosure.

Well, unemployment is almost at 9% and with the auto industry closures taking place, we’ll probably hit that number later in the year.

4) Banks will need to set up a simple system so that these foreclosured homes can be sold in a quick and efficient manner. Currently, we've had situations where the banks never responded to offers, or came back five months later with a yes. Of course, the buyers had given up and purchased another property. Buying a foreclosure home takes great patience and handyman abilities as many of these properties have been neglected.

Not only the foreclosed homes…but the many, many short sales where the lender takes months to decide, then wants to close the next day. Banks know nothing about real estate and it’s obvious now. Many of our sales are “short” or “cram-downs” where the lender ends up loosing money…but at least gets the property off his books.

5) The lower end of our market, properties under $250,000 will start selling in under four months. Expensive homes, defined as over $500,000 will languish. And, those McMansions that builders put up several years ago, will either get rented out or just sit on the market. Builders have to realize that price is the determining factor in buying a home. And, yes, several area builders have gone under. I'm guessing that we'll see one or two more during 2009.

Still true today. I drove past several McMansions that have been just sitting for over two years. Can’t imagine that those builders are too pleased. And, yes, we’ve had several additional builders go under.

And, the market under $250,000 is active. I’m seeing lots of sales in this price range as most first-time buyers can afford it. Many will see their housing payments less than rent.

6) One of the biggest holiday gifts this year: a porcelain piggy bank! Saving money is in! Using a budget is in! Reusing, repairing and fixing items is in! Barter is in! The bromides of our parents are coming back to haunt us. Here we are in a depression, remembering our parent's wisdom.
Some irony!

Seems like our savings rate went from ZERO to 4% in the past few months! What a change. And, many people are paying off their credit cards and opting to use CASH…what a novel idea!

Our children and grandchildren will better manage their money as they’ve seen first-hand what can happen. We’ll be the last of the plastic generation.

7) If I were a seller and had to sell:
I'd clean out and declutter my house
Hire a professional cleaning crew
Price my home under my competition
Offer to pay buyer's closing costs
Throw in my first-born, if it made the sale!

Additionally, have my lawn professionally managed; paint my exterior if it needs it and definitely my interior. Heck, the place might seem so nice that if I had to stay another few years, I’d be able to.

8) If I were a buyer and had to buy:
I'd sign up at: www.moveuptonaperville.com
I’d plan on using that tax credit
I’d buy within the next three months
I'd check out homes, sub-divisions and areas in DuPage County
I'd get a mortgage approval from my lender before I looked at any homes
I'd hire the most dedicated, experienced, smart agent I could find
I'd email Eileen Landau at MoveUPtoNaperville@Yahoo.com
and ask for help! Because it's too hard to do this alone.

If you'd like to search for Naperville properties, click here: moveuptonaperville.com

We've hit Bottom

Yup, I'm going out on a limb...but, hey, it's my blog!

From my perspective, our local real estate market has bottomed. If you were able to purchase in April or May you not only got the lowest interest rates in years, but you also got the lowest price as sellers just wanted to get out. Many of them still do.

In following the stats it's interesting to see that the lowest prices properties across the board have been selling. Most of these properties are foreclosed or short sales which the banks want off their books.

When will prices start going up? Not for a while. We still have too much inventory and not enough buyers.

Some Naperville Stats:

# of Active Single Family Homes

1257

Avg. List Price

$641,676

Average Market Time

234 Days



Homes Sold since 1/1/09

316

Average List Price

$449,612

Average Sold Price

$420,822

List to sell ratio

94%

Market time

184

When Bad News is Good News

The talking heads were decrying the low number of housing starts that were reported the other day. They opined that the world was coming to an end, or least, the housing market was swallowed up into a black hole.

Well sure the numbers were down. The lowest ever recorded, since they started recording these things.

But they (those pundits) miss the importance of these numbers. With fewer homes being started, this gives us a chance to sell off the existing inventory within the next 12 months. There's something close to 3 million newly formed family units each year, and many of them would like to have a home of their own.

Housing bottom? You betcha! And, just from my own observations as the lower priced short sale, REO and foreclosure properties sell (and they are selling), prices will start slowly increasing.

Back in the "old days" our average home appreciated between 3 and 5 per cent a year and most people were thrilled with that. The bubble years of 15, 20 and 30 per cent of appreciation is gone. I, for one, would be happy to start seeing that good old 5 per cent appreciation. Will it happen? Yup, just don't know when.

In the meantime, with our subdivisions down by $50,0000, $100,000 or more, we're just delighted that homes are selling. And, hope that the appraisers can bring in a reasonble price. But that's another blog.

If you'd like to search for Naperville properties, click here: moveuptonaperville.com

Naperville Single Family Prices as of 5-15-09

Naperville Stats as of May 15, 2009


Active Naperville Single Family Homes

1032 Home on the market

240 Average market time

$519,900 Median Listing Price

$673,645 Average Listing Price


Sold Properties Summary

1056 Single family homes sold in the past 12 months

149 Average market time

$407,000 Median Sold Price

$468,308 Average Sold Price

The average market time is still high…8 months, which is why many listing agents are taking one year listings!

There’s a big difference between the median and the average list price, over $150,000. Not small change.

On the sold side of the equation, shorter market time and another difference between the median sold and the average sold. What does this mean? Homes that are priced between $300,000 and $400,000 are moving faster than higher priced homes. And, you don’t need a degree to figure that one out. It also means that some of bank owned, foreclosure and short sales are actually closing! Yeah!

We have 216 active listings between $300,000 and $400,000. Average market time: 189.

We’ve had 313 homes sell in this price range during the past 12 months. Average sold price: $352,342.

If you'd like to search for Naperville area properties, click and sign up here: moveuptonaperville.com

The housing market is improving!

No stats to prove my impression...just anecdotal evidence.

Yesterday, I received a phone call from a buyer. She said that she'd been following a property that came on the market a month ago. And, she figured that the price would be reduced after 30 days. Surprize! The property price wasn't reduced and the property went under contract! And, this was an expensive home. The buyer was disappointed and opined that yes, the market was picking up.

Also, I've noticed that the foreclosures, REO and short sale properties are going under contract at a faster rate. So, the lower end of the market is seeing lots of activity. I suspect that first-time buyers appreciate the potential $8000 tax credit; the mortgage interest deduction and the low, low 30 year fixed interest rates. Could be that we'll have dual offers on some of these properties.

Historically, in our area, winter is slow...but once the dandelions appear, so do the buyers. I expect that our market now will see more activity and yes, higher prices even.

Is it too late to buy? Nope. But if I were contemplating a move, I'd do it now while rates, inventory and good weather are in abundance.

And, if you'd like to see homes in our area, just click and sign up here:MoveUPtoNaperville.com