Schools out, summer is here, and mortgage rates are jumping. Mortgage rates are now at the highest point since last November, before the Fed stepped in and started buying mortgage backed securities in an attempt to lower mortgage rates and get the economy moving. Over the last 2 weeks there has been a mind shift in the financial markets. The biggest worry before was of the economy grinding to a complete halt. The markets bigger concern now is that the economy is growing too fast, and that the government is spending too much. The situation is similar to one of those optical illusions which look one way until you shift your perception, and then a different image forms and you can't see it any other way. Like the Witch which becomes a beautiful lady, once your mind has made that shift, it's hard to see the other picture the way you did before.
Several things have happened this week which give weight to this new view of the economy. Consumer confidence has improved, the ISM index, a measure of purchasing strength, came in higher than expected though still low. But the big shift this week was in employment. The unemployment report is the biggest report released each month. When more people are employed that means they have money to spend which keeps the economy active. More unemployment means not only less money to spend, but more fear from those who are still employed wondering if they are next. Since the last quarter of last year, when the financial crisis started, employment has been cliff diving. Each month this year has shown an extra five or six hundred thousand people newly unemployed. This month was projected as slightly better but more of the same and expectations were that the number would be around 525,000 jobs lost. When the number was released at 345,000, much better than expected, the fixed income markets sold off and mortgage rates jumped again.
But the employment report is a kind of an illusion itself. The 345,000 jobs lost was much better than expected, but in an economy which needs an additional 150,000 jobs created just to keep up with population growth, this is still a miserable number. And even though this number was better than expected, the unemployment rate rose by a half percent to 9.4%, the highest it has been since 1983. Even this number is understating the real situation and including discouraged workers and the underemployed the real rate is at 16.4%. Part of this is a result of the 2 surveys using different methods for figuring their data, and it is likely that the numbers will be revised for the worse next month. Still, the question is, how can such a bleak employment situation be grounds for optimism on the economy and fears that we are growing too fast? Is the economy really moving ahead, or are we just past the panic part, and now experiencing a severe recession, but not the worst that was expected before? At the beginning of the crisis, it was described as being like we were a ball which rolled off a table, and we were in a free fall. That feeling is gone now. The news is still bad, but there isn't that what happens next panic we had before, wondering if we would ever stop falling. The ball has hit the floor now and this is a bounce. The bond market is saying that we are going to bounce back too high and too fast.
It looks like we are over the worst and this is obviously good news. But I'm skeptical that we are in any danger of overheating any time soon. Unemployment is still going to be a big problem for a while. GM and Chrysler have just announced a whole range of cutbacks in their factories, dealerships and management. We are just getting a whole new crop of college grads coming into the work place now and prospects for them are slim. Anecdotally, this doesn't feel like fast recovery. I've talked to 2 friends this week who own small businesses. One has, for the first time in the 15 years he's been in business, laid people off this week. Another is holding off on lay offs, but they haven't paid themselves a thing over the last 2 months to keep everyone employed. I went out to dinner last week at a popular restaurant, and there were empty seats at 7:30 on a Saturday night. When we left, the place was nearly empty. These are just anecdotes, not data, but this makes me think we have a ways to go before we start worrying about inflation.
Fed Chairman Ben Bernanke is in a tough situation now. Fed buying has been the engine that has kept mortgage rates low for most of this year. With the bond market in revolt, and treasury rates spiking, the Fed buying isn't enough to make a difference. Two of the Fed presidents in speeches this week hinted that we may need to hike interest rates some time to cool things down. On the other hand, Bernanke is a student of the depression, and I doubt that rate hikes will be coming any time soon. The dilemma is that we are seeing improvement, but if the economy is going to be functioning at a sustainable level consumers have to lead the way. That will be hard as long as the housing market is still in the sick ward. Home sales have picked up, but there is still too much inventory on the market, and foreclosure are going to grow as long as the unemployment rate stays high. If rates stay high, this will knock the housing market down another notch, which will then do the same to the general economy. Low mortgage rates are a key part of the recovery plan, and the Fed doesn't want to see the half a trillion dollars they've already used turn out to be wasted money. The Fed will continue to do what it can to bring mortgage rates down and keep them low. But for this to work, the market needs to have another shift in thinking. The picture looks a lot like a beautiful girl now, but one bad report and the Witch face pop out again.
For now, the refinance market is dead, but with low prices and an $8,000 first time home buyer's tax credit the purchase market is still heating up. Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates are based on the highest conforming loan amounts, which give the best pricing. Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me (Illinois mortgage company) and I'll take the time to find the rate and program that is best for you:
These are just a few of the mortgage programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.
Illinois Mortgage Rates First time home buyer loans
The big news this week was the election. After what has seemed like an eternity it is finally over. Now we have a break from negative ads for about a year before the congressional races start again. But now with Obama as our new President Elect, there is a little less uncertainty out there and we at least know who our leader is going to be going forward. This has already helped stabilize the markets. The waiting game is now focused on who he will pick for Secretary of the Treasury and what he plans to do about the economy. He has already said that the first priority is to put together a new stimulus plan. The first stimulus plan where the government sent everyone checks was a complete bust. This stimulus plan is expected to be tied to increasing jobs and building infrastructure. The advantage of this approach is that at least we will have something to show for it once the money is spent.
The news on the economy continued to be bleak, but there are real signs that the credit crunch is easing. The Libor rate, which spiked to nearly 5% when the credit crunch hit in October, is now down in the low 2s. This is a big benefit for anyone who has an adjustable mortgage that is about to convert. Now the conversion rate is likely to be in the low 5s rather than above 7 like it was a month ago. Other indicators are also showing the panic lifting in the credit market, though banks are still holding onto money rather than lending it out. The TARP program, also known as the bank bailout, was put into place to recapitalize the big banks and get them to start loaning money again. It looks like their plans for now are to hold onto the cash or use it for buying new companies. I'm not sure how this will change, but it will need to in order for the economy to recover. Overseas the British and European central banks both cut rates. With global rates low and so much money being pumped into the economy, lending should pick up over time.
Like I said before, the other economic news was pretty bleak. Ford and GM announced quarterly losses of 2.5 to 3 billion dollars. GM is losing money at the rate of about a billion per month and they expect to run out of cash next year if it continues like it is. The auto industry will be the next big bailout. The employment report came in at a loss of 240,000 jobs, a downward revision on last month's report showing more jobs lost and the unemployment rate rising to 6.5%. Job losses are accelerating, so it is going to get worse before it gets better.
There is good news on mortgage rates. Mortgage bonds have been fluctuating wildly and rates had risen over the last month even as all the fundamental factors pointed toward lower rates. On election day the mortgage bond market went wild with a rally of 113 ticks, a vote of confidence in the end of election season and knowing someone new will be in charge. Rates were off a little at the end of the week, in spite of the employment report which in a normal market would have caused rates to drop further, but we have seen about a 3/8s improvement in mortgage rates for the week.
Here is what Illinois Home mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee. The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or Contact me (Illinois mortgage company) and I'll take the time to find the rate and program that is best for you.) :
FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.
These are just a few of the mortgage programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
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I hope you've all had a Happy Halloween. Last year I bought what I was sure was going to be plenty of candy for the trick-or-treaters, but around 7:00, after a big pack of kids came by, we were nearly out of supplies. My goal is always to get through the night without too much leftover candy. I try not to have too many sweets around as we can all do better without them, but I hated the idea of being one of those guys who didn't have candy when kids came by. I ended up racing out to the store for reinforcements. And, of course, we didn't have another visit the rest of the night. This Halloween I decided I was going to be better prepared and bought one more bag than I had last year. The evening started out slow with no one coming by until well after dark. I live in an older neighborhood with bigger lots and longer driveways. It seemed for a while that kids were bypassing our area for a close by subdivision where the homes were closer together, which means a shorter walk for treats and more candy in less time. With no one coming by I thought that might be the case again this year. Then everyone came at once. They were in there own smaller groups, but all the groups hit at the same time. Supplies ran low again, I panicked and sent my son out for more treats. And, again, that was it for the night. Now we have several pounds of excess candy which I will eat, and regret. It turns out my original prediction was just about dead on, but I panicked and figured that the flood of kids would keep on coming.
I think we are starting to see the same thing in the markets now. In the last few weeks since the credit crunch hit, the over all sentiment on the economy and nearly all the markets has turned down right gloomy. The Consumer confidence index came in this week at 38, much lower than expected and the lowest reading since they started the index back in the 1960s. The stock market rallied this week, but even so the drop over the last month has been staggering. The news on the housing front has been similarly bad. On a year over year basis foreclosures are up sharply and values are down. The talk is that we are starting or possibly hip deep in a recession that may be much more serious than any we've seen in years. There is no doubt that these are scary times, and I expect that things will get worse before they get better. But it is also clear that we are still in panic mode and the markets usually bottom out long before the economy improves. I'm thinking we are much closer to the bottom than most people realize.
Just a couple of months ago the biggest fear was inflation. Oil prices were up to $149 per barrel, and there were predictions that it would hit $200 within the year. Oil closed Friday at around $68 per barrel. The drop in oil and other commodities works like a pay increase to most consumers, paying less for gas gives them a little more for other expenses. Then you look at all the money that has been pumped into the economy over the last few months through the government's drive to contain the credit crunch and avert the worst of the down turn. So far we haven't seen much benefit from this huge infusion of money, but in the long run this will have an effect. There are signs that the credit crunch is slowly easing (the Libor and the Ted spread are coming down). Some of the panic is psychological. The election is just a few days away, and I think that everyone is anxious to have the election over, and having a new leader should boost confidence in the future. If the polls hold out and it is Obama, he has promised a $300 billion stimulus plan which would send money to strapped state governments, and build big infrastructure projects. This is aimed at getting more jobs and more money flowing. Expect more programs like this to come.
The Fed this week lowered their Fed funds rate down to 1%, the lowest it has been since 2003 and 2004. The problem now isn't that money is too expensive, but that banks are still afraid to lend. But all these signs point to a change coming. The combination of low rates and all this money being spent should do the job of priming the pump over time. There are other bits of good news out there. The US is still considered the safe haven for global money, and as the wave of panic crested globally, money flowed into dollars and T-bills. So even if we don't have confidence in our economy, global investors still do. Some astute commentators are saying that we are near the bottom in the stock market (others say we have a ways to go yet). In the real estate market, home sales were up over the previous month in September and inventory actually fell. This was before the credit crunch really hit, so my guess is the October number won't be so good. But what this does mean is that there are a lot of buyers out there, mostly first time home buyers without a home to sell, who are seeing the market as a bargain, and waiting for the right time to jump in. When ever the government sets monetary policy they have a tendency to overshoot. Right now deflation is the biggest concern, but down the road, with a few trillion more dollars pumped into the system, inflation could be the biggest problem. We are hitting the time of year when home sales naturally slow down, but I think there is a good chance that this winter could be the bottom of the market.
Mortgage rates are still trying to find direction. Mortgage bonds were worse most of the week, but after hitting a support level near their worst point for the year, they started to improve. All the indicators point toward lower mortgage rates and if this were a rational market rates would be considerably lower. But we are still in an irrational market where investors are afraid to own anything, so it may take some time before things normalize. If you are in the market for a mortgage, give me a call and I can help you figure out not only your qualification, but also help you with the timing and picking the right time to lock in your mortgage.
Here is what Illinois Home mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee. The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or Contact me Illinois mortgage company and I'll take the time to find the rate and program that is best for you.) :
FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.
These are just a few of the mortgage programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
If you've been following interest rates lately, you might have whiplash. Rates have gone up, then back down, then up again. And that's all in the same day. Over the last year mortgage rates have been more volatile than at any time in the nearly 17 years I've been following them. But in the last few weeks, since the credit crunch hit, the volatility has gone through the roof. Mortgage rates have tested their high point for the year, then swung around and dropped to the best rates we've seen in the last few months, before swinging back the other way and nearing the yearly highs again. What is going on with mortgage rates?
In normal times, mortgage rates go up and down based on activity in the mortgage backed securities market, and the prices move based on how traders read the state of the economy and the possibility of inflation in the future. Inflation brings down a bond's yield, so any hint of inflation is going to decrease the value of a mortgage bond, meaning interest rates will go up. On the other hand, when the economy is slowing down this means that the yield is safe, so more investors buy in and mortgage rates go down. That is how it works in normal times. But these aren't normal times.
All the economic reports point to a slowing economy, which should mean that rates go down. But that hasn't been the case. Oil and commodity prices have dropped like a stone in the last two months. This should have made rates go down, but it didn't. Unemployment is up, and so are foreclosures, while the stock market and home values are down. All of these should mean that rates are going down. Yesterday the consumer confidence index slipped to an all time low, and mortgage rates got worse. In fact, the normal concerns of inflation and economic slowdown don't seem to have any correlation with mortgage rates now. So again, what is going on?
I think there are two explanations for what we are seeing, de-leveraging and panic. I've talked about de-leveraging before. This is like a margin call on the markets. Big investors, including mutual funds and hedge funds, have borrowed heavily to leverage the return on their investments. This strategy works great when the market is going up, a small amount of money controls a bigger investment and the returns are magnified. But what works well on the way up can be a killer on the way down. The losses are now magnified and in order to pay back the losses, investors are forced to sell everything they have - the good as well as the bad. The other explanation is panic. In a time of uncertainty everything is suspect and nothing does well. This needs to play itself out and confidence needs to return before the markets can stabilize.
But I do see two things which make me think that mortgage rates are still likely to go down.
1 - The risk for holders of mortgage bonds has gone down. Now that the Government has taken control of Fannie and Freddie mortgage bonds, are nearly as safe as treasuries. So as long as there is faith in the US economy (So far, so good. The dollar has gone up during this crisis) having the US government standing behind them, mortgage bonds should out perform other investments from a risk standpoint.
2 - The goal of the Fed and the Treasury is to get the economy growing again, and in order to do this the housing sector needs to get healthier. Treasury Secretary Paulson has said that one goal is to get mortgage rates down so that home owners have an incentive to buy. That hasn't worked out so well yet, but over time it is likely.
The Fed is expected to cut the Fed Funds rate today by .50%. This will mean that rates for business loans and home equity loans drop, but it won't necessarily help mortgage rates. Often mortgage bonds worsen after the Fed cuts rates. But usually within a week or so, the market sees a benefit and rates do drop. No one knows the timing, and in this crazy market there are no hard and fast explanations. But don't be surprised if rates do start dropping again soon.
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
At the end of last week and the beginning of this week, it was starting to look like the markets were chilling and the real panic was over. Maybe not. The world wide panic has shifted from worries about the credit crunch to worries about the severity of the global recession. One trader defined this market as periods of panic interrupted by moments of calm. It is not just people or investors panicking, but the banks themselves. The banks are still afraid to lend money, and with all the markets in downdraft, investors are having to sell whatever they have, good, bad or ugly, in order to raise cash (except for treasury bonds, money is rushing into the safety of T bills). In a way this is like a margin call on the entire global economy. When you buy stocks on margin (with borrowed funds) and the stocks go up, a small investment can turn into a big return. We are seeing the opposite of that now. As prices of nearly every asset class drop, the banks, investors and other market participants need to come up with extra cash to meet their margin calls. With prices down they need to sell more in order to come up with the cash required, and this feeds into a downward spiral where lower prices feed more selling which means the prices drop even lower.
The remedy for this is two things, confidence, and liquidity. Governments, both here and abroad, are doing everything but dropping money from the sky, so liquidity is coming into the system. Confidence could take longer. The US is still looked at as the economic leader, in spite of all our problems, and having a lame duck president with almost no economic credibility is not helping to inspire confidence. The election just over a week away won't solve the problems, but just knowing someone else will be at the helm may help to restore confidence that better times are coming down the road.
Some good news came out of the real estate market this week as existing home sales unexpectedly jumped by 5.5% last month. This was the biggest increase in 5 years. This is a sign that buyers are coming into the market as home prices drop. This is also a sign that the foreclosures that are now a big part of this market, are being absorbed. This does put pressure on the values of all homes, but it also means we are getting closer to equilibrium. Builders are not putting much new inventory on the market, and there are a lot of first time home buyers waiting in the wings, so we may be closer to a bottom than many people think.
All the economic reports continue to point to a recession and the big question now is how long and how deep it will be. Commodity prices are falling, oil is now down to around $65 per barrel, and gas prices are dropping like a stone. I don't think this is going to make anyone want to rush out and buy a Hummer, but it will help ease the stress on budgets. Former Fed Chairman Alan Greenspan went before congress this week and basically said he'd screwed up. He said that he never saw this coming and he was sure that markets would regulate themselves better than the government ever could. All our financial turmoil now is a result of a flaw in the system he didn't realize was there. We will be seeing a lot more regulation going forward.
Mortgage bonds started out the week with a huge rally. Rates improved through Wednesday when we were quoting some 30 year fixed rates at 5.875%. But volatility is still the rule, and despite a lot of good reasons why mortgage rates should be heading further down, bonds sold off heavily Thursday and Friday, breaking through support levels and ending the week at the worst point for the week. Mortgage rates are slightly better than where they ended last week, but much worse than where they were on Wednesday. This wide swing in mortgage bonds and mortgage rates has been the pattern over the last months. If you are in the market for a mortgage, the best thing you can do is understand how rates change, and be in a position to lock in when the opportunity presents itself. I expect that rates will drop again, but in this market there is no guaranty that they will stay down.
Here is what Illinois Home mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee. The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or Contact me Illinois mortgage company and I'll take the time to find the rate and program that is best for you.) :
FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.
These are just a few of the mortgage programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.
Expect the volatility to continue this week.
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
It is always a leap of faith to do something for the first time, and first time home buyers who are in the market to buy a home now need to take a bigger leap than normal. These are scary times in the real estate market. Home prices are down sharply from where they were last year, or even over the last several years. The credit crunch has morphed into a financial crisis and it looks like we are in a recession, and the recession may get worse before it gets better. Financing is tighter than it was before and you will need to have a down payment in order to get a mortgage. Being a first time home buyer is always scary but with fear in the air the safe thing to do is to sit on the sidelines. Or is it?
There is no way to know when you reach the bottom of a market, and if you buy your first home now you may be buying early. (But buying real estate should never be looked at as a short term decision. If you are buying a home you need to plan on being there for a minimum of 5 years.) But a few years back when everyone said real estate was the thing to get into, this was the same time when prices were the highest. When home prices were at their peak they looked like they would continue to go up. Now when home prices are much lower, most people are convinced that they will continue to go down. In the stock market, one school of thought is called contrarian investing - the idea that crowds are usually wrong, too optimistic when things are good and too pessimistic when the market is bad. The idea here is that the best time to buy is when the mood is bleakest and conventional wisdom says it is the worst time to buy. I've talked before about how greed and fear move the markets. It works the same in the real estate markets.
Here are some reasons this could be the right time for a first time home buyer to buy their home now or over the coming months:
With the credit crisis reaching a head, boatloads of money have been pumped into the economy. It was necessary to pump this money in to restore confidence, but we won't see the results of this pump priming for months. There is always a lag in the system, but this added liquidity will be felt, probably starting next spring.
The banks will start lending again now that the government is investing in the biggest banks and guaranteeing so many loans. This takes some of the risk away and makes it easy for lenders to lend. This won't mean we are going back to the easy credit period we were in, but we won't be strangled by lack of credit.
The real estate market has been going down over the last few years, before most people really realized it, and prices are already down a by lot. Looking backwards, the risky time to buy was when the market was the hottest.
Real estate is negotiable. The properties that are selling now break down into 2 main categories, sellers who are motivated to sell, and bank owned properties or short sales.
Mortgage money is available, there are first time home buyer programs where you can buy with a low down payment, and mortgage interest rates are low. When the economy and the home market pick up, rates may be much higher, so your monthly payment would be higher, too.
I'm not saying that the economy is going to improve right away, it is likely to get worse. I don't see home prices jumping higher any time soon, either. There are too many homes on the market now, and inventory is likely to grow as the economy worsens. At the same time there is a huge pent up demand of first time home buyers who want or need to buy a home, but have been sitting on the sidelines waiting for the right time to get in. At some point the buyers will jump in, and we will shift from a strong buyer's market back to a sellers market.
First time home buyers may have a great opportunity now and in the coming months. You need to look at your situation and see what is right for you, both now and over the long term. As scary as it looks now, buying in a down market may be the best thing you can do.
If you are a first time home buyer or want to know exactly it takes to buy a home and get a mortgage in today's market, click here for a Free, Home Buyer's Guide.
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
Cook County tax bills were sent out last week, and for a lot of homeowners the bills were a big surprise - and not in a good way. My phone has been ringing with home owners wondering how their taxes moved up so sharply. Home values have trended down over the last few years, but accessed values have moved up, in some cases by a lot. The problem is that properties are re-accessed every 3 years (each township rotates so they are not all done at the same time), and this year the re-assessment comes at a time when legislation has phased out some tax caps, so the result is a spike in tax bills while the value of their home is lower.
The real estate tax system is complicated and there are a number of factors that go into calculating the tax bill. The first thing to do is to check your bill and make sure you are getting all the correct exemptions. If you aren't getting your homeowners exemption this could make a big difference. But one of the major factors is the property's accessed value. If you can show that the accessed value is higher than the home's real value, you may be able to get your tax bill lowered. There are attorneys and specialists who do this regularly and charge you a percentage of the taxes you saved. Or you can do this yourself.
If the property was purchased within the last 3 years, the assessor will base the new accessed value on the sale price. This might not help you if you bought when the market was still moving up, and now it is down from what you paid. If you've owned the home longer, your accessed value will be based on what comparable homes have sold for recently.
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
I think it is safe to say that our economy is in a mess. The mortgage crisis and the panic in the stock market are now front page news. The credit crunch that has been festering over the last year has now come to a head and it looks likely that we are in for a deeper recession than many had hoped. When things go bad it is human nature to point fingers and try to access blame. Over the last few weeks I have gotten several emails and seen one video that claim the housing mess came about from too much government mandated lending to low income and minority home buyers. There is plenty of blame to go around, but Wall Street didn't gorge itself on CRA (Community Reinvestment Act) and low income housing loans. These loans are low profit and banks do as little as they can to keep in compliance with the laws. The loans that got us into the situation were the high risk, high profit sub prime and no income verification loans.
The emails I've been seeing point specifically to the CRA, which was passed in 1977 and expanded in 1995. The idea behind this act was to increase lending in areas that had been blighted, and to make loans available to low and moderate income borrowers and small businesses who were otherwise unable to get financing. Red lining, banks not willing to lend in areas with high minority concentrations, was a big problem in the real estate industry. The idea behind this and similar laws was to make it so larger banks couldn't discriminate against borrowers based on the area of the home, and make it possible for these areas to improve. These loans were all fully underwritten and the borrowers had to show an ability to repay the loan. Often times these loans spark a renovation in the otherwise blighted neighborhood. We've seen this in action in Chicago. All across the city, neighborhoods that had been down for the count, have now been revitalized. Over the last years there were other initiatives to increase the home ownership rate in both the Clinton and Bush administrations. These programs have had higher default rates than standard conventional loans. But not to an excessive degree, and compared to the overall mortgage market they were just a small drop in a big bucket.
The root of our current crisis comes down to the flow of money and the desire to make a higher return. ... There's more ... read the rest here
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
This week the markets were in limbo as everyone waited for congress to approve some version of the financial bailout bill. The original Paulson proposal has been changed around so there is now more transparency and accountability. At several times over the week it looked like an agreement was about to come together, but politics came in the way as neither party wanted to take the blame for what is sure to be an unpopular program. Even as groups of economists said that this isn't the right way to handle the crisis, the risk of not doing something quickly was judged as a bigger risk. The markets were fairly calm, but the expectation is that an agreement will be in place over the weekend, before the Asian financial markets open Sunday night.
Some sort of bill is likely to be passed, but the question is, will it be enough? Our entire financial system has been on life support for most of the past year. Ever since the bubble popped in the mortgage backed securities market, the financial markets has been close to frozen. When the system is working, banks lend money to each other and money flows smoothly. This is all based on confidence that whatever money is lent out will be repaid as agreed. Now, with so much toxic debt in the system, the banks are afraid to lend to each other. This is a crisis of confidence that has worked its way from Wall Street down to Main Street, and the fear is that if this isn't resolved soon, it will cut off credit to businesses of all sizes forcing us into a recession. The idea behind the bailout bill is that using up to $700 billion of tax payer money to buy up the bad debt, it will recapitalize the banks and the banks will then start to lend freely again.
But we could be in a recession already, or at best, the economy is slowing down sharply. Washington Mutual, one of the biggest banks in the country went belly up this week, the GDP for last quarter was down graded sharply. Jobless claims were up and home sales and durable goods orders were down. All of these things would have been huge news in a normal week, but were just side notes this week. With the economy slowing, will this bailout be enough to get the economy back on track? If the banks and investors are still nervous, what is to stop them from holding on to the money they get instead of lending it out freely? Odds are that we are still in for some economic contraction. What does the government have left to offer if this doesn't work? ... There's more..
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
Have you ever watched the TV game show The Price is Right? The most compelling part of that show is when the contestant has already won something, but they are now faced with a decision. Do they want to keep what they have, or trade it in for the unknown? What lies behind door number two? Is it a fabulous prize like a new car or a trip around the world? Or is it a goat and a wheel barrow? I think it is human nature to always want more, and when I watch the show I find myself rooting for the contestant to take the chance and go for the glory. But if they get the boobie prize, it is easy to feel kind of smug. They should have been happy with what they already had. When you buy a home or decide to refinance your mortgage, you are faced with the same kind of decision. Are you happy with the rates you are offered? Or do you risk it all by going for the unknown and taking your chance on what lies behind door number two?
Once you have decided on a mortgage company and started the mortgage process, one of the first decisions you make is whether or not to lock in your interest rate. This means you have a choice, locking in your interest rate guarantees that this is the rate you will have at the closing, no matter how high mortgage interest rates may rise. On the other hand, you can float the rate, which means you are taking a risk, but you have a chance to get a better rate if mortgage rates improve. One of the services I offer my clients is to keep them informed of what is happening in the mortgage backed securities markets, and let them know about any news that could affect mortgage rates. There are times when the mortgage market is improving and the odds strongly favor rates coming down. At times like this it may make sense to float for a bit and take advantage of the trend. There are other times when the odds say that rates will move higher. At these times the best thing you can do is lock in your rate and be able to relax and sleep at night. Then there are times like now when the market volatility is on steroids and the rate swings are hair raising, but you don't know if rates are trending up or falling down.
Mortgage backed securities (which mortgage rates are based on) have been volatile all year. Intra day price changes (where lenders change there prices during the day) used to be a rare occurrence. Now it's normal to have prices change at least once during the day, several times a week. This whole past year has been volatile, but in the past couple of weeks we have really kicked it up a notch.... there's more
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
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buying mortgage backed securities in an attempt to lower mortgage rates and get the economy moving. Over the last 2 weeks there has been a mind shift in the financial markets. The biggest worry before was of the economy grinding to a complete halt. The markets bigger concern now is that the economy is growing too fast, and that the government is spending too much. The situation is similar to one of those optical illusions which look one way until you shift your perception, and then a different image forms and you can't see it any other way. Like the Witch which becomes a beautiful lady, once your mind has made that shift, it's hard to see the other picture the way you did before.
Fed Chairman Ben Bernanke is in a tough situation now. Fed buying has been the engine that has kept mortgage rates low for most of this year. With the bond market in revolt, and treasury rates spiking, the Fed buying isn't enough to make a difference. Two of the Fed presidents in speeches this week hinted that we may need to hike interest rates some time to cool things down. On the other hand, Bernanke is a student of the depression, and I doubt that rate hikes will be coming any time soon. The dilemma is that we are seeing improvement, but if the economy is going to be functioning at a sustainable level consumers have to lead the way. That will be hard as long as the housing market is still in the sick ward. Home sales have picked up, but there is still too much inventory on the market, and foreclosure are going to grow as long as the unemployment rate stays high. If rates stay high, this will knock the housing market down another notch, which will then do the same to the general economy. Low mortgage rates are a key part of the recovery plan, and the Fed doesn't want to see the half a trillion dollars they've already used turn out to be wasted money. The Fed will continue to do what it can to bring mortgage rates down and keep them low. But for this to work, the market needs to have another shift in thinking. The picture looks a lot like a beautiful girl now, but one bad report and the Witch face pop out again. 
before the congressional races start again. But now with Obama as our new President Elect, there is a little less uncertainty out there and we at least know who our leader is going to be going forward. This has already helped stabilize the markets. The waiting game is now focused on who he will pick for Secretary of the Treasury and what he plans to do about the economy. He has already said that the first priority is to put together a new stimulus plan. The first stimulus plan where the government sent everyone checks was a complete bust. This stimulus plan is expected to be tied to increasing jobs and building infrastructure. The advantage of this approach is that at least we will have something to show for it once the money is spent.
There is good news on mortgage rates. Mortgage bonds have been fluctuating wildly and rates had risen over the last month even as all the fundamental factors pointed toward lower rates. On election day the mortgage bond market went wild with a rally of 113 ticks, a vote of confidence in the end of election season and knowing someone new will be in charge. Rates were off a little at the end of the week, in spite of the employment report which in a normal market would have caused rates to drop further, but we have seen about a 3/8s improvement in mortgage rates for the week.
hated the idea of being one of those guys who didn't have candy when kids came by. I ended up racing out to the store for reinforcements. And, of course, we didn't have another visit the rest of the night. This Halloween I decided I was going to be better prepared and bought one more bag than I had last year. The evening started out slow with no one coming by until well after dark. I live in an older neighborhood with bigger lots and longer driveways. It seemed for a while that kids were bypassing our area for a close by subdivision where the homes were closer together, which means a shorter walk for treats and more candy in less time. With no one coming by I thought that might be the case again this year. Then everyone came at once. They were in there own smaller groups, but all the groups hit at the same time. Supplies ran low again, I panicked and sent my son out for more treats. And, again, that was it for the night. Now we have several pounds of excess candy which I will eat, and regret. It turns out my original prediction was just about dead on, but I panicked and figured that the flood of kids would keep on coming.
Mortgage rates are still trying to find direction. Mortgage bonds were worse most of the week, but after hitting a support level near their worst point for the year, they started to improve. All the indicators point toward lower mortgage rates and 
ve based on how traders read the state of the economy and the possibility of inflation in the future. Inflation brings down a bond's yield, so any hint of inflation is going to decrease the value of a mortgage bond, meaning interest rates will go up. On the other hand, when the economy is slowing down this means that the yield is safe, so more investors buy in and mortgage rates go down. That is how it works in normal times. But these aren't normal times.
world wide panic has shifted from worries about the credit crunch to worries about the severity of the global recession. One trader defined this market as periods of panic interrupted by moments of calm. It is not just people or investors panicking, but the banks themselves. The banks are still afraid to lend money, and with all the markets in downdraft, investors are having to sell whatever they have, good, bad or ugly, in order to raise cash (except for treasury bonds, money is rushing into the safety of T bills). In a way this is like a margin call on the entire global economy. When you buy stocks on margin (with borrowed funds) and the stocks go up, a small investment can turn into a big return. We are seeing the opposite of that now. As prices of nearly every asset class drop, the banks, investors and other market participants need to come up with extra cash to meet their margin calls. With prices down they need to sell more in order to come up with the cash required, and this feeds into a downward spiral where lower prices feed more selling which means the prices drop even lower.
than normal. These are scary times in the real estate market. Home prices are down sharply from where they were last year, or even over the last several years. The credit crunch has morphed into a financial crisis and it looks like we are in a recession, and the recession may get worse before it gets better. Financing is tighter than it was before and you will need to have a down payment in order to get a mortgage. Being a first time home buyer is always scary but with fear in the air the safe thing to do is to sit on the sidelines. Or is it?
with home owners wondering how their taxes moved up so sharply. Home values have trended down over the last few years, but accessed values have moved up, in some cases by a lot. The problem is that properties are re-accessed every 3 years (each township rotates so they are not all done at the same time), and this year the re-assessment comes at a time when legislation has phased out some tax caps, so the result is a spike in tax bills while the value of their home is lower.
has been festering over the last year has now come to a head and it looks likely that we are in for a deeper recession than many had hoped. When things go bad it is human nature to point fingers and try to access blame. Over the last few weeks I have gotten several emails and seen one video that claim the housing mess came about from too much government mandated lending to low income and minority home buyers. There is plenty of blame to go around, but Wall Street didn't gorge itself on CRA (Community Reinvestment Act) and low income housing loans. These loans are low profit and banks do as little as they can to keep in compliance with the laws. The loans that got us into the situation were the high risk, high profit sub prime and no income verification loans.
been changed around so there is now more transparency and accountability. At several times over the week it looked like an agreement was about to come together, but politics came in the way as neither party wanted to take the blame for what is sure to be an unpopular program. Even as groups of economists said that this isn't the right way to handle the crisis, the risk of not doing something quickly was judged as a bigger risk. The markets were fairly calm, but the expectation is that an agreement will be in place over the weekend, before the Asian financial markets open Sunday night.
they are now faced with a decision. Do they want to keep what they have, or trade it in for the unknown? What lies behind door number two? Is it a fabulous prize like a new car or a trip around the world? Or is it a goat and a wheel barrow? I think it is human nature to always want more, and when I watch the show I find myself rooting for the contestant to take the chance and go for the glory. But if they get the boobie prize, it is easy to feel kind of smug. They should have been happy with what they already had. When you buy a home or decide to refinance your mortgage, you are faced with the same kind of decision. Are you happy with the rates you are offered? Or do you risk it all by going for the unknown and taking your chance on what lies behind door number two?
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