The S&P/Case Shiller index released yesterday, September 29 is a major indicator of national and regional home price movement. The new values for August displays the 6th consecutive month of improvment in home prices across the country from a low point in February/March. In our region, it is the 3rd consecutive month of improvment for the greater Chicagoland area.

In July, our median home values increased by 2.6%, the largest increase since the average began to decline in October of 2006. This point to further stabilization of our national and regional real estate market and gives hope to the notion that the biggest decline in home values in decades is approaching an end.

Current home values are at similar levels than they were in March 2003 and are currently approximatly 24% off the high average value reached in October 2006. This is an overall improvement from the low point of 28% reached in March of this year.

The current government tax incentive is continuing to bring out buyers this fall and should contine to improve home sales and values in our region and across the country. The only wrench in the works is the still-high national rate of foreclosures plaguing our country. This and the winter season has the possibility of putting a dent in recovering home values. If the rate of foreclosure begins to falter and decline howeve, this could accelerate the rate of home value recovery and effectively signal and end to the housing slump we’ve been in for the past 3-4 years.

Wow, a lot has happened since I’ve had a chance to post. First a few updates: 2009 has been an interesting year. There have been ups and downs in the real estate market just like with everything else. We started the year with a high rate of foreclosures and short sales. While these remain higher than normal, we’ve actually seen the numbers of new foreclosures and short sales fall through the summer. Many attribute this to loan modifications – people are attempting to re-finance into better loan terms rather than let homes go into foreclosure.

Another positive point in the market today is the $8,000 government incentive for first time homebuyers. Many of you might remember the $7,500 incentive offered in 2008 as a short-term repayable loan. Well, in 2009, the government raised the ante and turned that incentive into an $8,000 dollar-for-dollar tax rebate. They even went so far as to allow filers to claim the rebate on 2008 taxes VIA an amended return and get access to the money this year rather than waiting for spring of 2010.

 Despite these positive signs, the market still has declined through 2009 at the rate of approximately 1% per month. Inventory remains high and the available buyer pool remains low. Further, lenders have made it increasingly more difficult for buyers to qualify for loans.

Overall, 2009 has been an interesting year in real estate so far. My goal in the months ahead is to begin updating my online information and to continue presenting the latest news and tips going forward.

I’ve seen a lot of folks predicting a lot of things about the housing market. First, know that real estate is local. Market conditions in other parts of the country will change differently than our area. I feel it’s impossible to “peg” the market in general as far as what’s going to happen. However, in our area, I see a lot of optimism for this year. Let’s take a look at the factors:

There hasn’t been a lot of market activity over the past couple years. Buyers have been waiting for a good deal. Foreclosures are moving briskly but there’s an ever-plentiful supply. This has made it difficult to impossible for existing home owners to move. This pressure has created pent-up demand in the market.

Mortgage rates are extremely low right now. Close to the levels they were back in 2005 before Greenspan messed them all up. Lenders have tightened restrictions but those that can buy will be getting a good deal on loan rates.

There is increasing national attention being put on the housing crisis and the extreme number of foreclosures. The government may be stepping in at some point this year to stem the tide of foreclosures. Once the foreclosures slow, values will begin to rise.

Rentals are now getting harder to find and rent prices are rising. Rent prices are now getting higher than the cost of owning a condo or single-family home. This increases the number of buyers in the market as renters decide it’s better to buy than pay more in rent.

We’re now entering the spring market – a naturally busy time. This should reduce inventory as buyers begin to take up the slack. If the number of foreclosures begins to slow, we’re going to see a further reduction in inventory for the fall. This points to the possibility of an uptick in the market beginning this fall. I predict conditions will remain flat during the spring and summer as the existing inventory begins to be eaten up by buyer demand but this fall we should see a slightly better market.

What does this mean for home buyers? If you haven’t yet entered the housing market, now is the time. You want to buy when the market is at or close to bottom – not after it has started to recover. If you’re looking for the point at where there’s the biggest inventory at the lowest prices, put yourself in the position to purchase this spring and summer.

The foreclosure “crisis” we’re experiencing now (up 57% in some areas from 2007 levels) is affecting everyone – not just the homeowners who’s lives and credit are turned upside down by this unfortunate experience. If everyone knew how much this situation is affecting everyone, there might be more impetous to solve things. Here’s a quick breakdown of how the current situation is affecting YOU:

As homes go under foreclosure and banks take possession of the homes, they are eventually listed on the market at 20-30% under market value. Because of the limited number of buyers right now, this might mean that out of 20 homes in a subdivision currently on the market 3-4 might be foreclosures priced at 20-30% under the others. These mostly aren’t homes that are “torn up” in the traditional foreclosure sense – these are often homes in good condition. For a buyer that sees two homes that are very similar but one is priced 20-30% lower, the choice is obvious. What this means for homeowners trying to sell homes is that they’re forced to compete with the foreclosures and drop prices or not sell. This drops market values in an area as sellers have to constantly compete with a continuous stream of foreclosures. The homeowners pay for this crisis with dropping home values.

For buyers, purchasing a foreclosure at 20-30% under market value sounds like a sure thing. However, many buyers that haven’t contacted a loan officer in a while might be suprised to find that they can no longer qualify for a loan. Due to tightening restrictions on income ratios, credit scores and downpayment requirements, many buyers who want to buy and may be capable of affording a home will not be able to get a loan. Also, for the buyers that can get a loan, banks are borrowing money from the federal government at a greatly reduced rate (everyone’s been hearing about the dropping fed funds rate) and then turning around and lending that money to buyes at higher rates (rates have stayed the same or slightly risen while the fed funds rates has dropped) in order to generate more income on the loans being writted and to offset the losses taken by the increased number of foreclosures. The buyers pay for this crisis with tightened restrictions on loans and higher interest rates.

Of course, the most highly impacted party in a foreclosure is the homeowner being foreclosed upon. Not only do they have to endure a severe lifestyle change, but credit scores will be greatly damaged by a judgement of foreclosure. This means that they will be unable to buy for the foreseeable future (especially with increasingly-tightening lending restrictions). All of the foreclosures and buyers unwilling to commit to a purchase have driven up rental prices and made rentals hard to find. This compounds the problem by forcing families that have been foreclosed upon to pay more for a place to live.

This foreclosure “crisis” we’re currently experiencing has a ripple effect that touches everyone – no matter who you are. If you don’t feel it now, you soon will as your home value drops or rent goes up. It’s time for everyone to take responsibility for this mess and make the right moves to get these homeowners some help or otherwise reduce the rate of foreclosure for everyone’s sake.

The latest statistics show that the foreclosure rate in our area has risen 57% since March of 2007. A foreclosure is truely a sad event. It results in a family loosing one of their most important possessions. Shelter is a basic human need so when a family – often with small children – looses their home, it puts them in a survival situation. Often, the turmoil associated with a foreclosure can be devastating to a family – tearing apart husbands from wives and even children from mothers and fathers.

It’s easy to look on people experiencing a foreclosure as bad people – irresposible – someone that did something they weren’t supposed to do or didn’t pay a bill that was due. However, the truth of the matter is that many foreclosures are the result of situations that aren’t predictable. Still others are the result of a lack of information and education during the buying process.

Often, a foreclosure is the result of financial hardship – the loss of one’s job, sickness or other unforseen circumstances. As our country stands on the brink of a recession, jobs are getting difficult to find. Companies are cutting back and laying off. For single-income families, the loss of that income is devastating and often un-expected. My own father was laid off several months ago and has been looking for a job ever since to no avail. If he had to provide for a family and pay a mortgage at the same time – if this would have happened 20 years ago – we would have likely  joined the many people facing the decision of whether to spend an unemployment check on food or a mortgage.

Sickness can also place someone in extreme financial hardship. The inability to work combined with incomplete healthcare coverage – insurance companies seem to love denying claims nowdays – leave folks at thier most vulnerable the inability to earn income combined with a lot of extra healthcare bills. Again – a financially devastating situation that is nearly impossible for single-income families to bear.

The truth of this is that, these situations can happen to anyone at any time – they are the unforseen bumps in the road of life. For homeowners without a mortgage or enough equity in their homes, sometimes these events can be weathered. For the rest – foreclosure is often the result. These are not bad people – they are people who loved their homes. I see it almost every time I enter one of these homes – schoolwork and A+ papers on the fridge, toys, family pictures and heirlooms left behind in the chaos. These aren’t people who knew this would happen to them. It’s easy to think of people experiencing foreclosure as “those people” who did something wrong. However, we need to keep in mind that if this was a choice these buyers had when they purchased the home – if the loan paperwork had a box you could check that said “Foreclosure in 2 years” – I don’t think anyone would check it.