There are bright spots - and sold signs - amid the gloom.
Associated Press
Column: It really could be worse
November 23, 2008
BY KAY SEVERINSEN - SearchChicago-Homes Editor
This week starts a new real estate column by SearchChicago-Homes Editor Kay Severinsen. The weekly column will typically run on Fridays in the Chicago Sun-Times HomeLife section as well as on SearchChicago-Homes.
If your proverbial glass were 94 percent full, how pessimistic would you be? What if it were 78 percent full?
I'm asking because if you listen to news reports about the state of the housing market, you'll come away with the impression that not a single home has sold in two years. And if by some miracle a house were to sell, it would be priced roughly equivalent to a Big Value Meal.
But since Thanksgiving is almost upon us, perhaps we could look at that glass and feel thankful that there are some Big Gulps left. In the third quarter of this year, Chicago's nine-county area had 78 percent as many homes sold as in the same time period of 2007. And those homes that sold had an average price that was 94 percent of the price in that same time period a year ago.
Here are the actual numbers for the Chicago area from the Illinois Association of Realtors: 20,449 existing homes sold in Q-3 2008, down from 26,257 in 2007. Sale prices in the third quarter fell from an average of $337,187 to $317,008 in that same time period in 2007.
Think of it: In the past three months alone, more than 20,000 of your neighbors took the plunge in this time of desperation, when supposedly no one has a dime to spare and when Starbucks cafes are closing almost as fast as campaign headquarters.
How can this be?
Could it be possible that there are actually people out there who need to buy a house and have the money to do so? Could it be they found a good bargain given that prices are down and mortgage rates are good? Could some of them be first-time buyers who like the idea of getting $7,500 off the price, thanks to the Feds?
Maybe I'm dreaming; then again, maybe it's reality. And if that's so, maybe we should be thankful that Chicagoland's real estate glass is mostly full. We could also say thanks for a couple of other real estate realities:
· We don't live in California or Florida, where the markets have tanked. Florida's home prices plunged 20 percent from a year ago. San Bernadino, Calif., prices are down 39 percent over a year ago. Ours are down 6 percent.
· We don't live in California where a friend of mine is ecstatic that he and his wife, both working professionals, can finally buy their first house. It's a foreclosure, vacant for a year and a half, with a hole in the garage ceiling and all the appliances ripped out, for the bargain price of $280,000.
· We weren't flooded this year like Des Moines and Iowa City; most of us stayed high and dry.
· We had no hurricane evacuations and almost no homes destroyed by random wildfires
· The next president of the United States considers our city his kind of town.
If you are warm, safe and healthy and your loved ones are alive and thriving, isn't the rest of it just gravy?
SOUTH SIDE STATISITICS: Call me for latest statistics
HOT TICKETS:
Nutcracker Suite, Hyde Park School of Ballet - Mandell Hall, University of Chicago 1131 East 57th Street Chicago, IL 773-493-8498
Who knew there was a Hyde Park School of Dance? I was very surprised to get an invitation to a rehearsal in my box, but I was pleasantly surprised to see a production that was cute and brought back so many memories - no, it's not the Joffrey, but you'll keep a thriving dance school afloat, and these dancers will be much more responsive to your applause. BRAVO!
NEW EATS:
Italian Fiesta Pizzeria -4700 South Lake Park Avenue -773-684-2222
In answer to your question, yes, there is practically a gun to my head to make me eat at Italian Fiesta, a place that I know has the saltiest pizza on earth. The one and only reason that I am here is because I understand the President Elect loves this pizza so much that they are opening a spot in DC so that he won't be so lonely. I got the smallest sausage and cheese they had. It's so thin, it will slide under a door, and they haven't skimped on the salt in the slightest. I had to drink a lot of water today. The pizza is passable, but I can't see that it will take the place of Due's spinach and broccoli as my favorite pizza on earth. Sorry, Barack, we just have to agree to disagree. I know good food, and this I'm sorry to say, just isn't it.
Saturday, November 29, 2008
Sunday, September 7, 2008
House Buying Incentives - From the City of Chicago
The City of Chicago is offering an incentive to home buyers in Chicago that you might want to take advantage of -call me for information:
CHICAGO TO HOME BUYERS - FIND YOUR PLACE
By Susan Diesenhouse
Chicago Tribune reporter
September 5, 2008
The city is launching a campaign to lure skittish home buyers off the sidelines to purchase $150,000 to $450,000 homes in which the city has an investment."Everything is slowing down," Mayor Richard Daley said at a press conference Thursday announcing the Find Your Place in Chicago program. "You don't want [city-assisted development] to stall."
The program will use a combination of price reductions, down-payment assistance and financial aid provided by the non-profit Partnership for New Communities, Harris Bank and private developers. Many developers are offering sales incentives that they will continue rather than finance new ones.The city, while not putting in any new money, has organized the effort and is launching a marketing campaign to publicize existing city tax credits and price-reduction programs. The goal is to sell about 200 homes in 26 neighborhoods.
Much of the financial aid will go to buyers of about 100 homes at former public housing project sites being redeveloped through the Chicago Housing Authority's Plan for Transformation. The city already provides help for those buying homes in projects being developed with help from the Department of Housing.All of the homes in the program have been built with city assistance, such as low-cost land sales, land leases, direct financial subsidies and federal or state tax credits funneled through the city. "We want Chicagoans to know that we have affordably priced housing in vibrant neighborhoods across the city and that this is a good time to buy," housing commissioner Ellen Sahli said.
If the program can jump-start sales, it will help keep alive the Plan for Transformation, a public-private effort to create mixed-income enclaves on once-troubled public housing project sites, said Jonathan Fanton, president of the John D. and Catherine T. MacArthur Foundation, the single largest contributor of new funds for the mayor's sales effort.The foundation ponied up half of the $1 million in the Partnership for New Communities fund to give a $10,000 discount to the first 100 buyers of units in seven Plan for Transformation developments. For those sales, Harris Bank will cover up to $1,500 in closing costs on fixed-rate mortgages, Sahli said.Parkside at Old Town, which has closed on the sale of 60 of the 270 units in Phase I, could be a beneficiary since it put 30 units into the pool of 100."We hope this will kick-start sales," Parkside development manager Allison McDonald said.Mitchell Newman, principal of Stratagem Builders LLC, will offer a month of free assessments for two basement condominiums at Lake Park Gateway II on the South Side, priced at $199,000 each. But he's wary about the program's prospects."Other city marketing efforts have had good intentions but not been that effective," Newman said. "Most of all, what we really need is a database of qualified buyers that we can contact by e-mail."Visit FindYourPlaceInChicago .org or ThePartnershipForNew Communities.org for more information.sdiesenhouse@tribune.com
HOW TO DETERMINE YOUR BANKS FINANCIAL HEALTH:
A little digging will tell you whether it's a safe place for your cash
By E. Scott Reckard, Los Angeles Times Staff Writer September 7, 2008
How can you tell whether your bank is in hot water?More people have been asking that question since the collapse of Pasadena mortgage giant IndyMac Bank in July. After the government took over the bank, many customers had to wait in line for hours before they could speak to anyone about their deposits.
Sidney Eisenberg would like to avoid that inconvenience."Who wants to stand in line to do the paperwork, or find out because you didn't dot an 'i' or cross a 't' some bureaucrat doesn't want to give you your money? Life is too short to engage in any more hassles than necessary," said Eisenberg, 62, of Rowland Heights, whose investments include bank certificates of deposit as well as stocks and bonds.The Federal Deposit Insurance Corp. says that when a bank fails, most customers who are covered by deposit insurance don't lose access to their money at all. IndyMac customers who didn't want to stand in line at a branch were still always able to access their accounts online or at an ATM, the agency says.
But when it comes to money, some people don't want to take any chances. Even if you know that your account is 100% insured, you still may want to check on the soundness of your bank or credit union.Where do you start? Eisenberg, a retired General Motors executive, clicked on a "security" link on the website of his bank, Citibank, but found only "a bunch of trivial info about 'phishing' and online security scams."Regulators rate the soundness of financial institutions but don't disclose the resulting grades. Savvy consumers, however, can turn to ratings generated by private firms that wade through the oceans of numbers that banks report to regulators.
The Federal Deposit Insurance Corp.’s website lists 11 firms that rate banks and thrifts and provide reports online, by mail or even over the phone. That information can be found at www.fdic.gov/bank /individual/bank/index.html.The firms generate their ratings by feeding data taken from the banks' quarterly reports to regulators into proprietary computer programs.Information on banks and thrifts that is made available includes net worth (also known as capital), problem loans, profit or losses, cash on hand and reserves for losses.Some of these services are expensive and oriented toward financial professionals.
But Bankrate Inc. and BauerFinancial Inc. give free access to their ratings on all 17,000 U.S. banks, savings and loans and credit unions. Most institutions get three or four stars, with five best.Veribanc issues twin ratings: one on the institution's current condition, plus a forecast of its prospects. The ratings for one bank or credit union cost $10; additional institutions are $5 apiece.The rating experts take pains to caution that a low rating does not signal that collapse is likely. Even the worst-off banks -- those on the FDIC's secret list of troubled institutions -- have failed only 13% of the time, the agency says. Most worked their way back to health.Comparing Bankrate's ratings with the website's data on CD interest rates, it's easy to see that many institutions offering high yields have few stars, leaving you to perform your own risk-reward analysis.In any case, if your bank gets low grades, check to make sure all your money is insured by the FDIC so that you at least won't lose any funds if the bank fails.
Basic FDIC insurance tops out at $100,000 per customer, but it is possible to insure many times that amount at a single institution by setting up joint accounts and trusts.To determine whether your deposits are fully insured, don't rely on the assurances of lower-level bank employees, said Greg McBride, senior analyst at Bankrate."Do you really want to have as your financial advisor someone making $10 an hour on the other side of the teller window?" he said.
McBride advises visiting the FDIC's online Electronic Deposit Insurance Estimator or contacting the FDIC call center at (877) 275-3342. For credit unions, the National Credit Union Administration’s website has a similar calculator at webapps.ncua.gov/ins.If you need to find another place to park some or all of your money, you can compare interest rates online at Bankrate. Also, each week BauerFinancial publishes a free list of money market and CD rates offered by banks and thrifts that get at least 3 1/2 stars. The list can be found at www.jumboratenews.com/btc_cdratewatch.asp.Eisenberg discovered that Bankrate gave Citibank three stars -- not awful but not great either.He doesn't really think the giant New York bank will ever fail, but nonetheless he withdrew about $100,000 that was uninsured at Citibank and socked it away in a CD at Union Bank of California."Why wouldn't you want absolute peace of mind if you're only earning 3 1/2 % or 4% on a CD?" he said. "At that return, you're not getting paid to run any risk at all."scott.reckard@latimes.com
MELLOW YELLOW - 1508 East 53rd Street 773-667-2000
Still the home for south side crepes - Mellow Yellow is still doing well. I ate there recently for breakfast, and their omlettes are great - just what you want after a long walk on the lakefront. The hash browns weren't what I expected, but they were passable. Don't miss their strawberry sundaes - now that Baskin Robbins is gone, that's all I have to look foward to. Check it out!
CAROLINE, OR CHANGE – The Court Theatre – September 11 – October 19-
DON'T MISS: The coins that 8-year-old Noah carelessly leaves behind in his pockets are more than just spare change to Caroline Thibodeax, an African American housekeeper working in a stifling basement laundry room in Louisiana in 1963. Blending blues, gospel, and traditional Jewish melodies in a breathtaking score, this deeply personal story from Pulitzer Prize-winner Tony Kushner (Angels in America) is drawn from the playwright’s own childhood. The vast social change taking place in 1960s America is the perfect backdrop for a powerful story that the New York Times proclaimed “an extraordinary new musical.” Chicago’s own E. Faye Butler will perform the title role.
CHICAGO TO HOME BUYERS - FIND YOUR PLACE
By Susan Diesenhouse
Chicago Tribune reporter
September 5, 2008
The city is launching a campaign to lure skittish home buyers off the sidelines to purchase $150,000 to $450,000 homes in which the city has an investment."Everything is slowing down," Mayor Richard Daley said at a press conference Thursday announcing the Find Your Place in Chicago program. "You don't want [city-assisted development] to stall."
The program will use a combination of price reductions, down-payment assistance and financial aid provided by the non-profit Partnership for New Communities, Harris Bank and private developers. Many developers are offering sales incentives that they will continue rather than finance new ones.The city, while not putting in any new money, has organized the effort and is launching a marketing campaign to publicize existing city tax credits and price-reduction programs. The goal is to sell about 200 homes in 26 neighborhoods.
Much of the financial aid will go to buyers of about 100 homes at former public housing project sites being redeveloped through the Chicago Housing Authority's Plan for Transformation. The city already provides help for those buying homes in projects being developed with help from the Department of Housing.All of the homes in the program have been built with city assistance, such as low-cost land sales, land leases, direct financial subsidies and federal or state tax credits funneled through the city. "We want Chicagoans to know that we have affordably priced housing in vibrant neighborhoods across the city and that this is a good time to buy," housing commissioner Ellen Sahli said.
If the program can jump-start sales, it will help keep alive the Plan for Transformation, a public-private effort to create mixed-income enclaves on once-troubled public housing project sites, said Jonathan Fanton, president of the John D. and Catherine T. MacArthur Foundation, the single largest contributor of new funds for the mayor's sales effort.The foundation ponied up half of the $1 million in the Partnership for New Communities fund to give a $10,000 discount to the first 100 buyers of units in seven Plan for Transformation developments. For those sales, Harris Bank will cover up to $1,500 in closing costs on fixed-rate mortgages, Sahli said.Parkside at Old Town, which has closed on the sale of 60 of the 270 units in Phase I, could be a beneficiary since it put 30 units into the pool of 100."We hope this will kick-start sales," Parkside development manager Allison McDonald said.Mitchell Newman, principal of Stratagem Builders LLC, will offer a month of free assessments for two basement condominiums at Lake Park Gateway II on the South Side, priced at $199,000 each. But he's wary about the program's prospects."Other city marketing efforts have had good intentions but not been that effective," Newman said. "Most of all, what we really need is a database of qualified buyers that we can contact by e-mail."Visit FindYourPlaceInChicago .org or ThePartnershipForNew Communities.org for more information.sdiesenhouse@tribune.com
HOW TO DETERMINE YOUR BANKS FINANCIAL HEALTH:
A little digging will tell you whether it's a safe place for your cash
By E. Scott Reckard, Los Angeles Times Staff Writer September 7, 2008
How can you tell whether your bank is in hot water?More people have been asking that question since the collapse of Pasadena mortgage giant IndyMac Bank in July. After the government took over the bank, many customers had to wait in line for hours before they could speak to anyone about their deposits.
Sidney Eisenberg would like to avoid that inconvenience."Who wants to stand in line to do the paperwork, or find out because you didn't dot an 'i' or cross a 't' some bureaucrat doesn't want to give you your money? Life is too short to engage in any more hassles than necessary," said Eisenberg, 62, of Rowland Heights, whose investments include bank certificates of deposit as well as stocks and bonds.The Federal Deposit Insurance Corp. says that when a bank fails, most customers who are covered by deposit insurance don't lose access to their money at all. IndyMac customers who didn't want to stand in line at a branch were still always able to access their accounts online or at an ATM, the agency says.
But when it comes to money, some people don't want to take any chances. Even if you know that your account is 100% insured, you still may want to check on the soundness of your bank or credit union.Where do you start? Eisenberg, a retired General Motors executive, clicked on a "security" link on the website of his bank, Citibank, but found only "a bunch of trivial info about 'phishing' and online security scams."Regulators rate the soundness of financial institutions but don't disclose the resulting grades. Savvy consumers, however, can turn to ratings generated by private firms that wade through the oceans of numbers that banks report to regulators.
The Federal Deposit Insurance Corp.’s website lists 11 firms that rate banks and thrifts and provide reports online, by mail or even over the phone. That information can be found at www.fdic.gov/bank /individual/bank/index.html.The firms generate their ratings by feeding data taken from the banks' quarterly reports to regulators into proprietary computer programs.Information on banks and thrifts that is made available includes net worth (also known as capital), problem loans, profit or losses, cash on hand and reserves for losses.Some of these services are expensive and oriented toward financial professionals.
But Bankrate Inc. and BauerFinancial Inc. give free access to their ratings on all 17,000 U.S. banks, savings and loans and credit unions. Most institutions get three or four stars, with five best.Veribanc issues twin ratings: one on the institution's current condition, plus a forecast of its prospects. The ratings for one bank or credit union cost $10; additional institutions are $5 apiece.The rating experts take pains to caution that a low rating does not signal that collapse is likely. Even the worst-off banks -- those on the FDIC's secret list of troubled institutions -- have failed only 13% of the time, the agency says. Most worked their way back to health.Comparing Bankrate's ratings with the website's data on CD interest rates, it's easy to see that many institutions offering high yields have few stars, leaving you to perform your own risk-reward analysis.In any case, if your bank gets low grades, check to make sure all your money is insured by the FDIC so that you at least won't lose any funds if the bank fails.
Basic FDIC insurance tops out at $100,000 per customer, but it is possible to insure many times that amount at a single institution by setting up joint accounts and trusts.To determine whether your deposits are fully insured, don't rely on the assurances of lower-level bank employees, said Greg McBride, senior analyst at Bankrate."Do you really want to have as your financial advisor someone making $10 an hour on the other side of the teller window?" he said.
McBride advises visiting the FDIC's online Electronic Deposit Insurance Estimator or contacting the FDIC call center at (877) 275-3342. For credit unions, the National Credit Union Administration’s website has a similar calculator at webapps.ncua.gov/ins.If you need to find another place to park some or all of your money, you can compare interest rates online at Bankrate. Also, each week BauerFinancial publishes a free list of money market and CD rates offered by banks and thrifts that get at least 3 1/2 stars. The list can be found at www.jumboratenews.com/btc_cdratewatch.asp.Eisenberg discovered that Bankrate gave Citibank three stars -- not awful but not great either.He doesn't really think the giant New York bank will ever fail, but nonetheless he withdrew about $100,000 that was uninsured at Citibank and socked it away in a CD at Union Bank of California."Why wouldn't you want absolute peace of mind if you're only earning 3 1/2 % or 4% on a CD?" he said. "At that return, you're not getting paid to run any risk at all."scott.reckard@latimes.com
MELLOW YELLOW - 1508 East 53rd Street 773-667-2000
Still the home for south side crepes - Mellow Yellow is still doing well. I ate there recently for breakfast, and their omlettes are great - just what you want after a long walk on the lakefront. The hash browns weren't what I expected, but they were passable. Don't miss their strawberry sundaes - now that Baskin Robbins is gone, that's all I have to look foward to. Check it out!
CAROLINE, OR CHANGE – The Court Theatre – September 11 – October 19-
DON'T MISS: The coins that 8-year-old Noah carelessly leaves behind in his pockets are more than just spare change to Caroline Thibodeax, an African American housekeeper working in a stifling basement laundry room in Louisiana in 1963. Blending blues, gospel, and traditional Jewish melodies in a breathtaking score, this deeply personal story from Pulitzer Prize-winner Tony Kushner (Angels in America) is drawn from the playwright’s own childhood. The vast social change taking place in 1960s America is the perfect backdrop for a powerful story that the New York Times proclaimed “an extraordinary new musical.” Chicago’s own E. Faye Butler will perform the title role.
Sunday, August 10, 2008
A Great Investment
Sunday, August 10, 2008
Unlike euros, dollars, and gold, real estate is unique and holds its value better than the stock market. This is a buyer’s market, so take advantage and get the place you’ve always had your eye on. I’ll be happy to help you – I’ve seen some great places in the last couple of weeks.
MARKET STATISTICS - want to know how many places are for sale in your neighborhood, average market time, list and final selling price - just ask me - I'll make a custom report for you.
THE NEW MATH OF LENDING
With banks tightening their credit standards, many have to walk a fine line when it comes to lending to consumers.
By David Ellis, CNNMoney.com staff writer
Last Updated: August 7, 2008: 12:15 PM EDT
Loans are certainly harder to get and a lot more expensive nowadays for consumers. But banks can get burned if they push too hard on credit.
NEW YORK (CNNMoney.com) -- Forget oil and gold. Credit might be the commodity that's in the scarcest supply these days.
Saddled by soaring loan losses, banks have been drastically tightening their lending standards, effectively putting credit out of reach for many consumers in search of mortgages, credit cards or car loans.
"Like the tide, credit goes in and out," said Jeff Davis, a bank analyst and managing director at FTN Midwest. "And right now it's headed out."
Raising the bar
According to the Federal Reserve's first-quarter survey of senior loan officers at some of the nation's largest financial institutions, banks were turning away an increasing number of consumers because of credit fears. The Fed is likely to report that this trend continued in the second quarter when it releases its latest senior loan officer survey later this month.
Banks endured rising loan losses in the quarter as the housing market deteriorated further and the economy sputtered. Hoping to preserve capital and rid themselves of these troubled loans, financial companies have, as a result, held borrowers to a much higher standard.
Auto loan providers, for example, have increasingly favored borrowers with higher income levels and have pushed for shorter lending terms.
Hoping to clear out all the toxic mortgages from their books, banks and other lenders are also raising the bar for potential homebuyers, demanding bigger down payments and additional up-front fees, effectively pricing some shoppers out of the market. And unlike in years past, fewer consumers are finding they can tap their home for cash via a home equity loan, notes Davis - unless you happen to be a prime borrower with a property where there is no pre-existing lien.
But by raising the bar, some would-be borrowers have fallen by the wayside.
"Once you start raising the standards, there will be that group of people that were on the borderline as far as underwriting criteria that may fall out," said Hugh Queener, chief administrative officer of Pinnacle Financial Partners (PNFP), a Nashville, Tenn.-based bank.
Credit, but at a cost
In addition to being tougher to get, credit is also a lot more expensive these days.
While the rates on various loans hinge on a variety of factors, such as the 10-year Treasury note and the prime rate, banks tend to have some leeway when it comes to setting lending rates. And some institutions are certainly taking advantage of this fact. Some banks, for example, are boosting rates sharply on risky loans in order to avoid attracting any new business.
"They just don't want them," said Adam Schneider, a principal at Deloitte Consulting who deals with clients in the financial services industry. "They are pricing their way out of the problem."
Others are upping rates simply to make a few extra bucks.
"They are finding they are still able to grow their balance sheet and gain market share even with higher pricing," said Jefferson Harralson, an analyst with Keefe Bruyette & Woods.
"But my sense is that they are tiptoeing into it since they so unfamiliar with the lack of price competition," Harralson added.
Not without risks
But banks must also walk a fine line when it comes to credit.
Some beleaguered lenders, for example, may see the value in turning away new loans in order to preserve capital and to live on for another day.
While banks and investors are justifiably concerned about lending, it is also possible that by making credit standards too difficult, institutions are effectively turning away business and ultimately sacrificing earnings growth. At the same, they run the risk of driving both existing and potential customers into the arms of their competitors - a risky proposition as borrowers can often be a repeat source of business.
Loan pricing can also be tricky.
Sky-high rates can ultimately scare away would-be borrowers to competitors. But even when a bank is able to get a borrower to take a high-interest loan, it has to be careful not to put themselves at risk. If a banks sets rates too high and a borrower is unable to keep up with payments, the bank only has itself to blame when defaults happen.
"There is no amount of interest you can charge on a bad loan that will make up for it," said Queener.
First Published: August 7, 2008: 12:01 PM EDT
VALOIS – 1518 East 53rd Street:Now the most famous people watching spot in Hyde Park, Valois is the place to be if you want to run into a Secret Service man. They have to eat sometime, and if they’re not at Starbucks, here’s the best place to find them. A word of warning, they don’t actually give Obama your campaign suggestions – they’re too busy trying to keep him alive. I haven’t eaten at Valois since I was a sophomore in high school, so I can’t offer a review that will be worth anything, but I’m told it’s still packed.
CAROLINE, OR CHANGE – The Court Theatre – September 11 – October 19
- DON'T MISS: The coins that 8-year-old Noah carelessly leaves behind in his pockets are more than just spare change to Caroline Thibodeax, an African American housekeeper working in a stifling basement laundry room in Louisiana in 1963. Blending blues, gospel, and traditional Jewish melodies in a breathtaking score, this deeply personal story from Pulitzer Prize-winner Tony Kushner (Angels in America) is drawn from the playwright’s own childhood. The vast social change taking place in 1960s America is the perfect backdrop for a powerful story that the New York Times proclaimed “an extraordinary new musical.” Chicago’s own E. Faye Butler will perform the title role.
Unlike euros, dollars, and gold, real estate is unique and holds its value better than the stock market. This is a buyer’s market, so take advantage and get the place you’ve always had your eye on. I’ll be happy to help you – I’ve seen some great places in the last couple of weeks.
MARKET STATISTICS - want to know how many places are for sale in your neighborhood, average market time, list and final selling price - just ask me - I'll make a custom report for you.
THE NEW MATH OF LENDING
With banks tightening their credit standards, many have to walk a fine line when it comes to lending to consumers.
By David Ellis, CNNMoney.com staff writer
Last Updated: August 7, 2008: 12:15 PM EDT
Loans are certainly harder to get and a lot more expensive nowadays for consumers. But banks can get burned if they push too hard on credit.
NEW YORK (CNNMoney.com) -- Forget oil and gold. Credit might be the commodity that's in the scarcest supply these days.
Saddled by soaring loan losses, banks have been drastically tightening their lending standards, effectively putting credit out of reach for many consumers in search of mortgages, credit cards or car loans.
"Like the tide, credit goes in and out," said Jeff Davis, a bank analyst and managing director at FTN Midwest. "And right now it's headed out."
Raising the bar
According to the Federal Reserve's first-quarter survey of senior loan officers at some of the nation's largest financial institutions, banks were turning away an increasing number of consumers because of credit fears. The Fed is likely to report that this trend continued in the second quarter when it releases its latest senior loan officer survey later this month.
Banks endured rising loan losses in the quarter as the housing market deteriorated further and the economy sputtered. Hoping to preserve capital and rid themselves of these troubled loans, financial companies have, as a result, held borrowers to a much higher standard.
Auto loan providers, for example, have increasingly favored borrowers with higher income levels and have pushed for shorter lending terms.
Hoping to clear out all the toxic mortgages from their books, banks and other lenders are also raising the bar for potential homebuyers, demanding bigger down payments and additional up-front fees, effectively pricing some shoppers out of the market. And unlike in years past, fewer consumers are finding they can tap their home for cash via a home equity loan, notes Davis - unless you happen to be a prime borrower with a property where there is no pre-existing lien.
But by raising the bar, some would-be borrowers have fallen by the wayside.
"Once you start raising the standards, there will be that group of people that were on the borderline as far as underwriting criteria that may fall out," said Hugh Queener, chief administrative officer of Pinnacle Financial Partners (PNFP), a Nashville, Tenn.-based bank.
Credit, but at a cost
In addition to being tougher to get, credit is also a lot more expensive these days.
While the rates on various loans hinge on a variety of factors, such as the 10-year Treasury note and the prime rate, banks tend to have some leeway when it comes to setting lending rates. And some institutions are certainly taking advantage of this fact. Some banks, for example, are boosting rates sharply on risky loans in order to avoid attracting any new business.
"They just don't want them," said Adam Schneider, a principal at Deloitte Consulting who deals with clients in the financial services industry. "They are pricing their way out of the problem."
Others are upping rates simply to make a few extra bucks.
"They are finding they are still able to grow their balance sheet and gain market share even with higher pricing," said Jefferson Harralson, an analyst with Keefe Bruyette & Woods.
"But my sense is that they are tiptoeing into it since they so unfamiliar with the lack of price competition," Harralson added.
Not without risks
But banks must also walk a fine line when it comes to credit.
Some beleaguered lenders, for example, may see the value in turning away new loans in order to preserve capital and to live on for another day.
While banks and investors are justifiably concerned about lending, it is also possible that by making credit standards too difficult, institutions are effectively turning away business and ultimately sacrificing earnings growth. At the same, they run the risk of driving both existing and potential customers into the arms of their competitors - a risky proposition as borrowers can often be a repeat source of business.
Loan pricing can also be tricky.
Sky-high rates can ultimately scare away would-be borrowers to competitors. But even when a bank is able to get a borrower to take a high-interest loan, it has to be careful not to put themselves at risk. If a banks sets rates too high and a borrower is unable to keep up with payments, the bank only has itself to blame when defaults happen.
"There is no amount of interest you can charge on a bad loan that will make up for it," said Queener.
First Published: August 7, 2008: 12:01 PM EDT
VALOIS – 1518 East 53rd Street:Now the most famous people watching spot in Hyde Park, Valois is the place to be if you want to run into a Secret Service man. They have to eat sometime, and if they’re not at Starbucks, here’s the best place to find them. A word of warning, they don’t actually give Obama your campaign suggestions – they’re too busy trying to keep him alive. I haven’t eaten at Valois since I was a sophomore in high school, so I can’t offer a review that will be worth anything, but I’m told it’s still packed.
CAROLINE, OR CHANGE – The Court Theatre – September 11 – October 19
- DON'T MISS: The coins that 8-year-old Noah carelessly leaves behind in his pockets are more than just spare change to Caroline Thibodeax, an African American housekeeper working in a stifling basement laundry room in Louisiana in 1963. Blending blues, gospel, and traditional Jewish melodies in a breathtaking score, this deeply personal story from Pulitzer Prize-winner Tony Kushner (Angels in America) is drawn from the playwright’s own childhood. The vast social change taking place in 1960s America is the perfect backdrop for a powerful story that the New York Times proclaimed “an extraordinary new musical.” Chicago’s own E. Faye Butler will perform the title role.
Tuesday, June 17, 2008
TIME TO CHANGE
YOUR DREAM HOME IS ONLY A PHONE CALL AWAY:If you’ve been sitting on the fence, now is the time to jump into the home of your dreams. It doesn’t make sense to pay for something that doesn’t meet your needs. Give me a call and let’s find your heart’s desire:
6939 South Crandon Unit 8F - a three bedroom, two bath condo, hardwood floors, vintage bathrooms, the kitchen needs updating, the living room and dining room have panoramic views of the South Shore community. This building also includes a parking garage that has an attendant on duty at all times. The unit is on sale for $99,900.00
700 West Van Buren #1209 - 1 bedroom and a den loft has an open kitchen with granite countertops, oak floors and cabinetry. It has a huge living room and a beautiful balcony with great city views. The master bedroom has built-in shelving and the unit has its own washer/dryer - a bargain at $274,000!
THIS WEEK'S OPEN HOUSE: 601 East 32nd St #1006 – 1 bedroom/ 1 bath with spectacular views of the south side, parks, Lake Michigan, and downtown Chicago. The area has ample parking. A stone’s throw away from downtown, this is the perfect first apartment. You will be able to watch the Fourth of July fireworks in the comfort of your home. It is available immediately. This is a rental - $1200 per month
The Open House will be Thursday, June 17th from 5:30 -7:00 pm
WHAT IS FLOOD INSURANCE:
Flood insurance denotes the specific insurance coverage against property loss from flooding. To determine risk factors for specific properties, insurers will often refer to topographical maps that denote lowlands and floodplains that are susceptible to flooding.
Hidden Floods Nationwide, only 20% of American homes at risk for floods are covered by flood insurance. Private insurers are unable to insure against the peril of flood due to the prevalence of adverse selection, which is the purchase of insurance by persons most affected by the specific peril of flood. In traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss. Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that insurers are unable to cover their costs in flood insurance.
In certain flood-prone areas, the Federal Government requires flood insurance to secure mortgage loans backed by federal agencies such as the FHA and VA. However, the program has never worked as insurance, because of adverse selection. It has never priced people out of living in insanely risky areas by charging an appropriate premium, instead, too few places are included in the must-insure category, and premiums are artificially low." [1] The lack of flood insurance can be detrimental to many homeowners who may discover only after the damage has been done that their standard insurance policies do not cover flooding, which can be defined as any excess of water or mud that is normally dry.[2] This can be brought on by landslides, a hurricane, earthquakes, or other natural disasters that influence flooding, but while a homeowner may, for example, have earthquake coverage, that coverage may not cover floods as a result of earthquakes.
In the United States
Many insurers in the US do not provide flood insurance in accordance to the risk factors established in some portions of the country. In response to this, the federal government created the controversial National Flood Insurance Program which serves as the insurer of last resort.
The National Association of Insurance Commissioners (NAIC) found that 33 percent of U.S. heads of household still hold the false belief that flood damage is covered by a standard homeowners policy.
If you are eligible, you must purchase a separate flood insurance policy through an insurance company that participates in the National Flood Insurance Program (NFIP). Flood insurance is available for residents of approximately 19,000 communities nationwide.
- From "Wikipedia"
LA PETITE FOLIE:
If you haven’t been over to see the new Treasure Island in Hyde Park, you probably haven’t seen one of the best restaurants in Hyde Park – La Petite Folie. This little gem is in the Hyde Park Shopping Center, the same shopping plaza that was once known for Cohn and Stern. Good food, quick service, and no nonsense offerings – it’s great for a romantic evening or a night of great good food. You should take advantage of the Prix Fixe menu from 5:00 – 6:30pm. It earns points for meeting the needs of the community at $30 a plate. Give it a try and let me know what you think.
La Petite Folie is located at 1504 East 55th Street 773-493-1394.
MUNTU DANCE THEATRE OF CHICAGO - DON'T MISS:
The Assembly Hall at International House at the University of Chicago will host the Muntu Dance Theatre of Chicago on Wednesday, July 2nd at 11am. This will be their Summer Dance Jamboree. This troupe is delightful. If you’ve never seen them, this is the perfect venue. You’ll be close enough to be enveloped in the sound of the drums, but not overwhelmed. International House is at 1414 East 59th Street.
6939 South Crandon Unit 8F - a three bedroom, two bath condo, hardwood floors, vintage bathrooms, the kitchen needs updating, the living room and dining room have panoramic views of the South Shore community. This building also includes a parking garage that has an attendant on duty at all times. The unit is on sale for $99,900.00
700 West Van Buren #1209 - 1 bedroom and a den loft has an open kitchen with granite countertops, oak floors and cabinetry. It has a huge living room and a beautiful balcony with great city views. The master bedroom has built-in shelving and the unit has its own washer/dryer - a bargain at $274,000!
THIS WEEK'S OPEN HOUSE: 601 East 32nd St #1006 – 1 bedroom/ 1 bath with spectacular views of the south side, parks, Lake Michigan, and downtown Chicago. The area has ample parking. A stone’s throw away from downtown, this is the perfect first apartment. You will be able to watch the Fourth of July fireworks in the comfort of your home. It is available immediately. This is a rental - $1200 per month
The Open House will be Thursday, June 17th from 5:30 -7:00 pm
WHAT IS FLOOD INSURANCE:
Flood insurance denotes the specific insurance coverage against property loss from flooding. To determine risk factors for specific properties, insurers will often refer to topographical maps that denote lowlands and floodplains that are susceptible to flooding.
Hidden Floods Nationwide, only 20% of American homes at risk for floods are covered by flood insurance. Private insurers are unable to insure against the peril of flood due to the prevalence of adverse selection, which is the purchase of insurance by persons most affected by the specific peril of flood. In traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss. Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that insurers are unable to cover their costs in flood insurance.
In certain flood-prone areas, the Federal Government requires flood insurance to secure mortgage loans backed by federal agencies such as the FHA and VA. However, the program has never worked as insurance, because of adverse selection. It has never priced people out of living in insanely risky areas by charging an appropriate premium, instead, too few places are included in the must-insure category, and premiums are artificially low." [1] The lack of flood insurance can be detrimental to many homeowners who may discover only after the damage has been done that their standard insurance policies do not cover flooding, which can be defined as any excess of water or mud that is normally dry.[2] This can be brought on by landslides, a hurricane, earthquakes, or other natural disasters that influence flooding, but while a homeowner may, for example, have earthquake coverage, that coverage may not cover floods as a result of earthquakes.
In the United States
Many insurers in the US do not provide flood insurance in accordance to the risk factors established in some portions of the country. In response to this, the federal government created the controversial National Flood Insurance Program which serves as the insurer of last resort.
The National Association of Insurance Commissioners (NAIC) found that 33 percent of U.S. heads of household still hold the false belief that flood damage is covered by a standard homeowners policy.
If you are eligible, you must purchase a separate flood insurance policy through an insurance company that participates in the National Flood Insurance Program (NFIP). Flood insurance is available for residents of approximately 19,000 communities nationwide.
- From "Wikipedia"
LA PETITE FOLIE:
If you haven’t been over to see the new Treasure Island in Hyde Park, you probably haven’t seen one of the best restaurants in Hyde Park – La Petite Folie. This little gem is in the Hyde Park Shopping Center, the same shopping plaza that was once known for Cohn and Stern. Good food, quick service, and no nonsense offerings – it’s great for a romantic evening or a night of great good food. You should take advantage of the Prix Fixe menu from 5:00 – 6:30pm. It earns points for meeting the needs of the community at $30 a plate. Give it a try and let me know what you think.
La Petite Folie is located at 1504 East 55th Street 773-493-1394.
MUNTU DANCE THEATRE OF CHICAGO - DON'T MISS:
The Assembly Hall at International House at the University of Chicago will host the Muntu Dance Theatre of Chicago on Wednesday, July 2nd at 11am. This will be their Summer Dance Jamboree. This troupe is delightful. If you’ve never seen them, this is the perfect venue. You’ll be close enough to be enveloped in the sound of the drums, but not overwhelmed. International House is at 1414 East 59th Street.
Monday, June 2, 2008
True Bargains
THERE'S A HOUSE OUT THERE WITH YOUR NAME ON IT:
There are a few properties that I have seen that are being sold at a good price - if you haven't seen them - don't wait - they won't last long:
6939 South Crandon Unit 8F - a three bedroom, two bath condo, hardwood floors, vintage bathrooms, the kitchen needs updating, the living room and dining room have pararamic views of the South Shore community. This building also includes a parking garage that has an attendance on duty. The unit is on sale for $99,900.00
2901 S Michigan #1504 - a one bedroom that was recently updated - new paint and carpeting with a partial lakeview. This building is choice because it is close to public transportation and a short ride from downtown. $129,000.
THIS WEEK'S OPEN HOUSE:
700 West Van Buren #1209 - 1 bedroom and a den loft has an open kitchen with granite countertops, oak floors and cabinetry. It has a huge living room and a beautiful balcony with great city views. The master bedroom has built-in shelving and the unit has its own washer/dryer - a bargain at $274,000! The Open House will be Saturday, June 7th from 3:30 pm - 5:30 pm
IT DOESN'T GROW ON TREES:
By the time you finish paying off the mortgage on your home, you'll have paid more in interest alone than the actual purchase price of the house. For example, if you borrow $125,000 at 8% for 30 years, you'll end up paying over $205,000 in interest, plus the $125,000 you borrowed. Your $125,000 house has cost you $330,000! so it makes sense to shop wisely for the best mortgage, since it will probably be the biggest financial decision of your life.
A mortgage is a mortgage is a mortgage, right? Wrong! There are many mortgage products on the market now, so it's important for you to do your homework to determine which type is best for you, and which bank, savings and loan, mortgage bank, finance company or credit union offers the best terms for that type of loan.
The Internet makes this process easier. You can find out how large a loan you qualify for, compare loans, search for the lowest rates in your area, and in some cases, apply online.
Although there are many mortgage products available, most fall into one of several general categories:
Fixed Rate
Fixed rate mortgages are the traditional loans that have a fixed interest rate over the life of the loan, typically 30, 20, 15, or 10 years. With these loans, your monthly payment for interest and principal never changes (your escrow expenses, such as property taxes and insurance, may change from year to year). Downpayments required on these loans can be as low as 5%. If you want predictable payments over the life of your loan and don't mind paying a bit more for this assurance, the fixed rate mortgage may be the best option for you.
Adjustable Rate
Adjustable rate mortgages typically start at a lower interest rate (and lower payments) but interest rates and payments fluctuate depending on market interest rates. A typical ARM is adjusted annually (although some are adjusted more frequently). Increases are usually capped for any given year and for the life of the loan. For example, a typical ARM might include an annual cap of two percentage points and a cap over the life of the loan of six percentage points. An ARM that starts out at 7.5% could increase to 9.5% in the second year, 11.5% in the third year, 13.5% in the fourth year, at which point it would be capped.
These loans are popular with people who expect rising income over the next few years because they can buy more house on a lower current income, confident that their increasing income will make the higher payments affordable if the interest rates rise in subsequent years.
Balloon Mortgage
If you know you'll be moving in five to seven years, and you'd like a lower interest rate but are uncomfortable with an adjustable rate, the balloon mortgage may be for you. These loans often have a somewhat lower interest rate than a conventional 30-year mortgage, but the loan is due in five to seven years. If you're still in the house at the end of the term, you'll have to find another mortgage in order to pay off the first one.
Jumbo Loans
Jumbo loans are just what their name implies: a larger than average loan. Most lenders follow the Fannie Mae or Freddie Mac federal guidelines for loans, which limit the amount you can borrow to $252,700. If you need to borrow more than this, you should look for a Jumbo loan.
Summary
The features of these loans are summarized in the table at the bottom of this page.
Before shopping for a mortgage, take advantage of some of the online tools that will help you be better informed so you can choose the mortgage that works best for you. - From "ABOUT:Financial Planning"
PARK 52 FINALLY OPENS:
It's been a long time coming, but the day has finally arrived - Park 52, Jerry Kleiner's expansion into Hyde Park, is open for business - go get all your money!
Park 52 is in Harper's Court across the street from Bettye O's Day Spa at 5201 S Harper. There is valet parking but it is very close to the city parking lot, so parking will not be an issue. You will enter a wide open space that reminds you of other Kleiner signature restaurants - a large bar that attracts a diverse crowd and an enormous dining room. Reservations are recommended - there was quite a crowd when I was there and I have heard that the wait can be long if you don't make arrangements in advance - give them a call at 773-241-5200.
The food is great - I had a hearty portion of the corn chowder - well worth it. I also enjoyed the salmon, which was seasoned to perfection, a light and filling meal. The fresh berries as a follow up were the perfect end to a perfect meal. You won't be disaapointed. Hopefully, there are many more options to come. Try it out and let me know how you like it!
COURT THEATRE - DON'T MISS:
Leslie Lee's play "The First Breeze of Summer" deals with a family matriarch reflecting on her life and loves over a hot June weekend as the conflict between her son and grandsons comes to a head. This play will end June 15!
There are a few properties that I have seen that are being sold at a good price - if you haven't seen them - don't wait - they won't last long:
6939 South Crandon Unit 8F - a three bedroom, two bath condo, hardwood floors, vintage bathrooms, the kitchen needs updating, the living room and dining room have pararamic views of the South Shore community. This building also includes a parking garage that has an attendance on duty. The unit is on sale for $99,900.00
2901 S Michigan #1504 - a one bedroom that was recently updated - new paint and carpeting with a partial lakeview. This building is choice because it is close to public transportation and a short ride from downtown. $129,000.
THIS WEEK'S OPEN HOUSE:
700 West Van Buren #1209 - 1 bedroom and a den loft has an open kitchen with granite countertops, oak floors and cabinetry. It has a huge living room and a beautiful balcony with great city views. The master bedroom has built-in shelving and the unit has its own washer/dryer - a bargain at $274,000! The Open House will be Saturday, June 7th from 3:30 pm - 5:30 pm
IT DOESN'T GROW ON TREES:
By the time you finish paying off the mortgage on your home, you'll have paid more in interest alone than the actual purchase price of the house. For example, if you borrow $125,000 at 8% for 30 years, you'll end up paying over $205,000 in interest, plus the $125,000 you borrowed. Your $125,000 house has cost you $330,000! so it makes sense to shop wisely for the best mortgage, since it will probably be the biggest financial decision of your life.
A mortgage is a mortgage is a mortgage, right? Wrong! There are many mortgage products on the market now, so it's important for you to do your homework to determine which type is best for you, and which bank, savings and loan, mortgage bank, finance company or credit union offers the best terms for that type of loan.
The Internet makes this process easier. You can find out how large a loan you qualify for, compare loans, search for the lowest rates in your area, and in some cases, apply online.
Although there are many mortgage products available, most fall into one of several general categories:
Fixed Rate
Fixed rate mortgages are the traditional loans that have a fixed interest rate over the life of the loan, typically 30, 20, 15, or 10 years. With these loans, your monthly payment for interest and principal never changes (your escrow expenses, such as property taxes and insurance, may change from year to year). Downpayments required on these loans can be as low as 5%. If you want predictable payments over the life of your loan and don't mind paying a bit more for this assurance, the fixed rate mortgage may be the best option for you.
Adjustable Rate
Adjustable rate mortgages typically start at a lower interest rate (and lower payments) but interest rates and payments fluctuate depending on market interest rates. A typical ARM is adjusted annually (although some are adjusted more frequently). Increases are usually capped for any given year and for the life of the loan. For example, a typical ARM might include an annual cap of two percentage points and a cap over the life of the loan of six percentage points. An ARM that starts out at 7.5% could increase to 9.5% in the second year, 11.5% in the third year, 13.5% in the fourth year, at which point it would be capped.
These loans are popular with people who expect rising income over the next few years because they can buy more house on a lower current income, confident that their increasing income will make the higher payments affordable if the interest rates rise in subsequent years.
Balloon Mortgage
If you know you'll be moving in five to seven years, and you'd like a lower interest rate but are uncomfortable with an adjustable rate, the balloon mortgage may be for you. These loans often have a somewhat lower interest rate than a conventional 30-year mortgage, but the loan is due in five to seven years. If you're still in the house at the end of the term, you'll have to find another mortgage in order to pay off the first one.
Jumbo Loans
Jumbo loans are just what their name implies: a larger than average loan. Most lenders follow the Fannie Mae or Freddie Mac federal guidelines for loans, which limit the amount you can borrow to $252,700. If you need to borrow more than this, you should look for a Jumbo loan.
Summary
The features of these loans are summarized in the table at the bottom of this page.
Before shopping for a mortgage, take advantage of some of the online tools that will help you be better informed so you can choose the mortgage that works best for you. - From "ABOUT:Financial Planning"
PARK 52 FINALLY OPENS:
It's been a long time coming, but the day has finally arrived - Park 52, Jerry Kleiner's expansion into Hyde Park, is open for business - go get all your money!
Park 52 is in Harper's Court across the street from Bettye O's Day Spa at 5201 S Harper. There is valet parking but it is very close to the city parking lot, so parking will not be an issue. You will enter a wide open space that reminds you of other Kleiner signature restaurants - a large bar that attracts a diverse crowd and an enormous dining room. Reservations are recommended - there was quite a crowd when I was there and I have heard that the wait can be long if you don't make arrangements in advance - give them a call at 773-241-5200.
The food is great - I had a hearty portion of the corn chowder - well worth it. I also enjoyed the salmon, which was seasoned to perfection, a light and filling meal. The fresh berries as a follow up were the perfect end to a perfect meal. You won't be disaapointed. Hopefully, there are many more options to come. Try it out and let me know how you like it!
COURT THEATRE - DON'T MISS:
Leslie Lee's play "The First Breeze of Summer" deals with a family matriarch reflecting on her life and loves over a hot June weekend as the conflict between her son and grandsons comes to a head. This play will end June 15!
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