Eldorrado Chicago Real Estate Market Update—All 77 Neighborhoods—South Loop Showcased

11-19

Monthly, on our Website and Social Media sites, we post enhanced statistical reports for all 77 Chicago neighborhoods showing market trends. The data for our reports is pulled directly from the MLS – Midwest Real Estate Data and encompasses every closed Sale and every listed property. We publish mid-month for the prior full month to get 100% complete and accurate data. Each month we showcase one neighborhood. We analyze the highlights of the report for a neighborhood that has done exceedingly well. This month we are spotlighting the South Loop, officially known on the 77 Chicago Neighborhood Map as Near South Side. The South Loop statistics are phenomenally impressive showing a strong market recovery. The positive stats for the South Loop neighborhood are indicative of well-educated Millennials and empty-nest Baby Boomers wanting many of the same things: access to cultural and civic activities, unique restaurants, walkability.

s-loopWe are analyzing from our visual graph Attached Single-Family, which includes all condos and townhomes.

  • On a year-over-year basis, the South Loop saw a 32.8% median sale price increase, $350,000 median price vs. $263,625.
  • On a month-over-month basis, October 2013 compared to October 2012, the median sale price increase rose up by 53.9%, $382,000 median sales price vs. $248,250.
  • Year-over-year closed sales were up 26.3%, 657 closed sales vs. 529 closed sales; month-over-month were up 44.2%, 75 Closed sales vs. 52 closed sales.
  • Market time year-over-year was down -51.0%, down to an average of 65 days vs.133 days. Month-over-month market time was down -60.7%.

Please click here to find the stats for your neighborhood. If you are not sure which of the 77 neighborhoods your “pocket neighborhood” is part of, consult our interactive map to find out. This Eldorrado designed interactive map has been used with permission by request from CPS, Chicago Public Schools. Many of our web searchers find us via our map. We hope you find it as useful.

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Sale Pending: What Does It Mean & Should You Make an Offer?

11-18

Before the days of online real estate listings, you knew a home sale was pending because you’d see a big red sticker across the “for sale” sign on the front lawn. But for home buyers searching listings online, it’s common to discover the words “pending” or “sale pending” only after you’ve already fallen in love with the photos, kitchen and location.

Many buyers assume that “sale pending” means the property is no longer available. The truth is, that’s not always the case. “Sale pending” can mean a few different things, depending on how a local market or a real estate agent works.

Here’s what you need to know to decide if a “sale pending” home is still worth pursuing.

Understanding ‘subject to’ and ‘contingent upon’

To understand what “sale pending” means, it helps to understand how a basic real estate transaction works.

A buyer generally makes an offer “subject to” or “contingent upon” a property inspection, a bank appraisal or full loan approval. In these situations, the buyer plans to close on the home but wants to be certain the property is in good condition and that financing can be secured. If the buyer can’t get financing, or there’s an issue with the inspection that can’t be worked out, the buyer has the right to exit the contract, subject to one of those terms.

A property with an offer may still be for sale

In some places, a home with some sort of contingency may be labeled as “active with conditions” or “active contingent.” Assuming all goes well, the buyer will move ahead with the sale. Typically, the buyer would have a week or two to complete the inspection and a few weeks to get an appraisal and loan, depending on the local market.

During this period, the seller is unable to enter into an agreement with another buyer, but the sale is not a “done deal.” What this means to another interested buyer is that there’s an opportunity for a “backup” offer. If the first offer falls through, the seller would prefer to go with another buyer who’s made a backup offer and is ready to go. Otherwise, the seller has to start over again — not an attractive proposition.

No more contingencies = ‘sale pending’

A sale that’s truly pending is one in which all contingencies have been removed. In that case, the buyer has had inspections and is ready to move ahead. The property appraised appropriately, and the buyer’s loan was fully approved.

At this point, the buyer removes all contingencies and is now “locked in” to buying the home. The final step is to move toward closing. This can take anywhere from a few days to a few weeks. Most agents won’t label a home “pending” until the buyer has removed all contingencies and the sale is a done deal. In this case, the sale is pending the final closing.

Still an opportunity?

Can a buyer walk away after removing all contingencies? Absolutely. The buyer isn’t the legal owner until the property has closed and the deed is recorded. From time to time, a buyer has an emergency and needs to exit the contract. Most likely, the buyer risks losing the earnest money deposit.

Is a ‘sale pending’ home worth pursuing?

If you love a property with a “sale pending” sign, it doesn’t hurt to give it a shot.

Find out about the status of the property. Has the buyer had the inspections? Did they go well? Any issues thus far? Have your agent ask the listing agent these questions to understand the current deal on the table. This will help you understand whether there’s a potential opportunity here.

Don’t get your hopes up when the home of your dreams has a “sale pending” status, of course. Instead, put the home on the back burner and follow the sale. Particularly in changing markets, buyers get cold feet or banks’ lending standards get more rigid, causing deals to fall apart. A smart buyer will make his or her interest known, so that if a deal falls apart, the buyer is right there, ready to step in.

(Source: Zillow)

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Housing recovery stumbling block: Weak household formation

11-15

What happens to real estate prices if new households don’t form?

It’s an interesting question. One that many economists prefer not to think about.

Jed Kolko, chief economist for Trulia, an online real estate listing site, says the prospects are “alarming.”

Of course, it isn’t just the prospects for pricing that are alarming. There’s an undercurrent of concern about what a lack of household formation means for the larger economy as well.

Let’s start at the top. In a normal year, roughly 1.1 million new households form. There are many reasons households form. Some are recent college graduates who move out on their own. Sometimes families split up, forming two households out of one. There are immigrants who move to this country who, after a period of time perhaps living with relatives, move out to their own home, sometimes purchasing real estate in as little as three to five years after moving to the U.S.

Since the recession, trends have changed. According to the latest Census figures, roughly 380,000 new households were formed in the last 12 months. And worse, the number of young adults living with their parents ticked up as well.

The latter trend is about young people not getting jobs, Kolko explained. “And even if they get jobs, they don’t move out right away,” he added. “You need to save up, to build up a cash cushion and the financial confidence to move out. You need to be able to pass a credit check and have the first and last month rent.”

At this point in recovery, Kolko believes we should be seeing household formation back not only at normal levels but higher.

“All those young people who moved in with their parents over the past few years and didn’t move out during the recession, there should be pent-up demand for household formation. Everyone was thinking once they move out, they will form lots of new households,” Kolko added.

It’s the worst sort of news for the new construction industry, which is still operating at about 50 percent of where it was during the height of the housing boom. Roughly 450,000 new homes are expected to be sold this year, compared with more than 800,000 in a more normal year.

Even if new household formation picks up, it will be awhile before hiring picks up in for new home construction because most of these individuals will rent before they buy. And if there are plenty of foreclosures, short sales, and vacant properties available to buy, it’s possible that the construction industry won’t get a boost for several more years.

It all comes back to young people and their employment prospects, which aren’t great, Kolko said.

“The share of young people working (now) is almost as low as during recession. Wages aren’t really rising. Student debt is up. Young people face tough circumstances today,” he noted.

Unfortunately for the housing industry, those tough circumstances are turning into alarming trends that bear close watch.

(Source: Chicago Tribune)

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U.S. Homes Spending Less Time on the Market

11-14

The housing market is improving every day, and as a result, homes nationwide spent far fewer days listed for sale in September than a year ago — one month less, to be exact.

Homes sold in the U.S. in September spent a median of 86 days on Zillow, down 30 days from 116 days in September 2012.

Zillow calculated the median number of days listings spent on Zillow, at the national, metro and county levels, dating to January 2010. In order to correct for homes that are listed, then removed and re-posted with new prices, Zillow considered multiple listings within 40 days at the same address as one listing. Since the beginning of 2010, homes nationwide have spent a median of 119 days on Zillow before being sold or taken off the market.

“The declining inventory of for-sale homes over the past year naturally creates pressure for buyers to more quickly snap up the inventory that is on the market. This demand has been fueled by huge resets in home prices since market peak, historically low mortgage rates and a slowly improving broader economic climate,” said Zillow Chief Economist Dr. Stan Humphries. “Home shoppers in today’s environment need to be prepared to move quickly, with pre-approvals in place and an established sense of what they’re willing to pay for a home. But even though things are moving fast, buyers should resist the urge to enter into bidding wars or pay prices they’re uncomfortable with. We do expect that this need for speed will abate in the near-term as mortgage rates rise and more inventory becomes available because of new construction and declining negative equity.”

(Source: Zillow)

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Considering a strategic default? Think again.

11-11

Anyone thinking of skating on mortgages owned by Fannie Mae or Freddie Mac may want to think again. As a result of new government reports, the companies say they are going to do a better job of going after scofflaws.

Fannie and Freddie can pursue judgments against borrowers who walk away from their loans even though they have the ability to make their payments. That’s called a strategic default, and many borrowers are taking that step — typically throwing in the towel because their homes are no longer worth as much as they owe.

But when their homes are sold at foreclosure and the proceeds are not enough to cover their outstanding loan balances, it creates a deficiency for which many defaulters either don’t realize they are liable or don’t care.

To date, the two government-sponsored enterprises, which are now highly profitable after five years of running in the red, haven’t done a particularly good job at pursuing deficiency judgments, according to scathing reports from the Office of the Inspector General at the Federal Housing Finance Agency.

But the agency says it is going to make the enterprises clean up their acts. And that should serve as fair warning to those who can pay but fail to do so.

As the Office of the Inspector General says time and again in the reports, chasing down strategic defaulters can not only cut the enterprises’ losses on bad loans, but also “serve as a deterrent to those who would chose to strategically default on their mortgage obligations.”

Going after strategic defaulters is big money. According to the inspector general report criticizing Freddie Mac’s lax practices, the company has left billions on the table.

The report found that Freddie Mac, which has received some $71 billion in taxpayer assistance since it was taken into conservatorship by the Federal Housing Finance Agency in September 2008, did not refer nearly 58,000 foreclosures with estimated deficiencies of some $4.6 billion for collection by its vendors.

Of course, only a percentage of that amount might have been recoverable, because some borrowers are simply tapped out. But because the bad loans weren’t even considered for recovery, Freddie Mac “eliminated any possibility” for collecting what is owed, the Office of the Inspector General said.

Now extrapolate that to Freddie Mac’s entire holdings and you can see we’re talking some really big money here. As of December, the big secondary mortgage market company had nearly 50,000 foreclosures still on its books, carrying a value of some $4.3 billion. And as of March 31, it held 364,000 mortgages that were 60 days or more delinquent and were, therefore, likely foreclosure candidates.

Fannie Mae’s portfolio of troubled assets is much larger. At the end of last year, it owned more than 105,000 foreclosed properties valued at $9.5 billion and carried a “substantial” shadow inventory of 576,000 seriously delinquent mortgages that were 90 days late or more and likely to end up in foreclosure.

It does a better job than the smaller Freddie Mac, according to the Office of the Inspector General. But in a separate report, Fannie Mae earned a slap on the wrist for not taking any action on nearly 30,000 accounts because statutes of limitations had expired or were about to. For the same reason, the report says, it failed to pursue deficiencies of some 15,000 accounts that already had been reviewed for collection by its vendors.

Several factors influence the decision to pursue deficiency recoveries. But most importantly, state laws dictate timelines for filing claims. Some states do not allow deficiency judgments at all, but they are fair game in about three dozen states and the District of Columbia.

However, 10 have short windows — only 30 to 180 days in which collections are allowed.

But not going after defaulters where it is permissible to do so not only reduces the chances of recovering potentially billions, the reports point out, but also “incentivizes” other borrowers to walk away from mortgages they can afford to pay.

The new reports are a follow-up to one issued a year ago that called the Federal Housing Finance Agency, which oversees Fannie Mae or Freddie Mac, on the carpet for failing to provide enough guidance about effectively pursuing and collecting deficiency judgments wherever and whenever possible.

In September, in response to a draft of these latest reports, the agency set down requirements for both enterprises to maintain formal policies and procedures for managing their deficiency collection processes, establish a set of controls to monitor their collection vendors and comply with state laws in an effort to preserve their ability to pursue collections.


(Source: Chicago Tribune
)

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