(readers please note, this is a monthly market report available by email as well…sign up to get the full report, including all the corollary documents at http://www.home-in-evanston.com)  

Well, folks, **it is really hitting the fan in the mortgage market (not to mention the stock market).   Pardon my French. In a startling and generally unforeseen escalation of the recent sub-prime lending implosion, Wall Street investors have literally pulled the rug out from under jumbo (over $417,000) and non-conforming (no-doc, low-doc, etc.) loan products, causing several high-profile mortgage houses to halt financing virtually overnight, including ABC, American Home Mortgage (which filed for bankruptcy and closed its doors last Friday), mTeam Financial (which is rumored to be in serious trouble), and HLB.

Due to the flattening-to-decreasing nationwide real estate market, homeowners struggling with mortgage adjustments are unable to rely on an increasing market to support them through a refinance or sale and many find themselves unable to pay their bills which makes investors understandably leery about buying these loans. Lenders still willing to take on these products are offsetting their risk with jacked-up rates at or approaching 8% and no one knows where or when the insanity will stop.

Amazingly enough, however, rates on conforming loans (those under the $417,000 cap) have gone DOWN, and there doesn™t seem to be any speculation that funding these loans in the near future is in any jeopardy.   BUT these buyers may still be squeezed by the significant tightening-up of minimum lending requirements as non-conforming loans drop out of play.   Common practices such as combining loans (80/10/10s for example) are disappearing and the word on the street is that ANY buyer needs a really good credit score (660 or higher) and 10% down payment on a property to get a rate under 7%.

With the average national home price in the low $200,000 range, much of the country is barely affected by all of this.   However, the Chicago and Evanston markets certainly see a fair number of affected loans. If you™re a buyer with a contract on a property or expecting to make an offer anytime soon, CALL YOUR MORTGAGE BROKER RIGHT AWAY.   You do NOT want to discover, as many people have in the last two weeks, that the funds are simply œnot there as you™re sitting at the closing table.

“But how’s the market?” you ask.   Well, July was far busier than I expected!   Some people speculate that it’s the weather, but I think it’s that people see the end of the low mortgage rates looming. In any case, while  the rate of contracts written dropped a little from June–it wasn’t by much!   In additional good news, market times for both types of housing continues to trend down, and, in a related statistic, absoprtion rates  are in the very healthy 4-6 month range except at the bookends price points for houses (7+ months for the $200k-$300k range and about a year for $1M+), and for condos over $350k, which range from 8 to 16 months. The best news of all is that inventory has for the first time in what feels like forever REDUCED for single family homes and condos alike!