Over the past few weeks, we’ve received more rain than I can remember here in the Fox Valley. It wasn’t as un-relenting of a deluge as the Century Rain of 1996 where we got 17 inches in 24 hours, but it was a consistent build up of rain over the course of perhaps a week or so. There were several smaller violent storms that blew through causing wind damage to certain areas and dropping trees throughout the region.

The majority of the worry that many homeowners in the area have felt has been due to the water. Many of the Fox Valley communities are river communities. There are several large waterways that run through the area including the Fox River and DuPage River. River levels were running at decade-high levels and in some cases spilling over bridges and banks and flooding lowland areas. Another issue has been the that when you have that much constant rain, storm sewers can become clogged or just overwhelmed.

For the last week, we’ve seen a reprieve in the rain - there has been several dry days and the water levels have fallen drastically giving homowners a chance to clean up and dry out. Perhaps one of the most prevalent issues people experienced during the rain was water in the basement. If you are a Fox Valley homeowner dealing with water in the basement, the first thing you need to do is protect your belongings - get them up out of the water and get them dry. Next is pumping out the standing water and cleaning up the debris and finally, a good humidifier is a requirement. Remember, concrete is porous and retains its moisture well. Moisture is a good breeding ground for molds and other fungus. You need something to take the excess moisture out of those spaces.

The writing has been on the wall for a while, yet many have been hesitant to read what it says. Many Americans are finding themselves getting deeper into debt. Part of this problem likely comes from the expense of owning a home of thier own. For a rising segment of homeowners, the cost of home ownership is forcing a tough situation into a dangerous one; creating a “foreclosure crisis” that will likely last several more years.

Earlier this year, current figures released by the Department of Housing and Urban Development are showing an alarming upswing in the rate of foreclosures. In some areas, of all home owners who were extended sub-prime loans, the rate of default is as high as 14-20% when 4-6% is considered “healthy”.

This data has been all over the news — the stock market has been in upheaval. Sub-prime lenders are usually experienced in extending financing to borrowers with credit problems, unable to verify income, job status or other factors that make them a poor fit for traditional financing. In the past few months, many major players in the sub-prime market have sold off operations or in some cases simply closed their doors and gone out of business. Just as their clients were unable to afford the escalating expenses of homeownership, many sub-prime financial companies found it impossible to absorb the foreclosure rate we are now seeing.

The backlash doesn’t stop with the sub-prime market. Even traditional lenders are increasing requirements and placing more scrutiny on the loan approval process. This begs the questions of how did this issue ever begin in the first place?

A fair amount of the responsibility can be laid at the feet of the borrowers themselves. In this age of “big is best” many Americans see a big home as an indicator of success. This pushes many buyers into trying to purchase a larger, more expensive home without enough thought to the affordability of one. Often buyers push the levels of affordability and end up in a difficult situation or worse.

Blame can also be laid at the feet of some financial institutions. Who is better informed as to how much house debt a borrower can afford? The current debt-to-income ratios are either being ignored, or the types of loans that lenders are providing are not good choices. Loans like 28/2 and 27/3 loans with fixed teaser rates that adjust after 2 or 3 years with a balloon or margin are just a few of the loans that have caused borrowers to get into trouble.

Of course the end result of this mess will be better qualified and better educated home owners but did things really have to go so far? We’ve seen foreclosre problems hit most of the large regions we work including Naperville real estate, St. Charles real estate, Montgomery real estate and Yorkville real estate. Frankly, I sometimes think they did. Lately it seems like it takes a good deal of shock to get some things back on track. In the mean time, if you are thinking of purchasing real estate in the next few years, it’s important that you start talking with your local REALTOR or loan officer and make sure your finances and credit scores are in order before you continue with applying for a loan.

For many buyers looking for move-up homes, new construction is a popular option. With current builder incentives, buying a brand new home has also become much more affordable. However, many buyers are finding great deals in the resale market in the Fox Valley. It’s not uncommon to find homes $20,000 - $50,000 below their 2005 levels as more and more sellers are forced to reduce price as the market continues downwards. For many buyers, the general stability of the resale market is a more popular choice than new construction. Granted, we’ve seen prices drive downwards over the past two years, but compared to the unknowns of buying in a brand new subdivision, many buyers are willing to trade being in a home noone else has lived in for being in an already-established neighborhood. If you are considering new construction, it might be a good idea to also see what’s available to you in the resale market. You may be able to find a home with a good deal of equity just waiting for the next market surge in the next couple years.

Looking back on the July market, we experienced a further slowdown from 2006 levels of nearly 10%. The lower price ranges continue to sell fairly well and condos and townhomes seem to be fairly active. However, many lenders are reporting much of the sales activity going on right now is in the first-time homebuyer segment of the buying population. Usually a slow month in the industry due to lots of family vacations going on and the increased gas prices of summer, July 2007 was no exception to this. Towards the end of the month we started to see an uptick in activity. Many of us that have been doing open houses have seen some increased numbers of buyers out looking and flyers are starting to evaporate from brochure boxes around the area. This points to a likely resurgence comming in August, September and October.

 The other factor is that we’re seeing an increase of homes comming on the market this fall. This is bad news for sellers who have been waiting, some for months, for a contract. As inventory increases, it will likely absorb some of the upswing in buyer activity we’ll see this fall. The net result will be that we won’t see a significant reduction of inventory likely until the winter months. If you are a seller in this market, my advice to you is to get your home looking sharp and price it well these next few months and plan on pushing forward with a sale before winter hits. For buyers during the next few months, expect to continue to see great prices and exceptional selection.