Here are a couple of Chicago real estate news items I thought were interesting.
Another $100,000 knocked off the price of the Ferris Bueller home
They’re still trying to sell that Ferris Bueller house at 370 Beech St in Highland Park. The house that featured the Ferrari driving out the window of the elevated garage can now be bought for only $1,295,000. That link above goes to my last post on this home when they cut the price by $125,000.
Ukrainian Village/ East Village Home Prices Show Solid Gains
A home in my neighborhood at 1848 W Erie, built by Noah Properties in 2011, just re-sold for 13.4% more than it originally sold for just 2 years ago. That’s a bit better price appreciation than Chicago overall, which went up around 8% in that same time period according to the Case Shiller home price index.
It’s a 5 bedroom, 3 1/2 bath house that I believe is probably around 4100 sq ft, though none of the realtors have ever bothered to show this critical information. This was actually the cheapest of the 3 homes built on this stretch of Erie, presumably because it had siding instead of brick along the two sides. BTW, my wife and most people prefer brick but I’m increasingly of the opinion that brick on the sides is over-rated compared to Hardie Board. And I’d rather have Hardie Board than split face block.
More Housing Market Headwinds In Store With New Qualified Mortgage Rules
This is not Chicago specific but it’s pretty important news and doesn’t justify it’s own blog post. On January 10, 2014 new rules go into effect about the kinds of mortgages that Fannie Mae and Freddie Mac will guarantee. Beginning on that date, in order for mortgages to qualify (Qualified Mortgages) the borrower’s monthly debt payments can not exceed 43% of their income (This ratio is incorrectly labeled the debt to income ratio. Drives me nuts.) and the fees on the mortgage origination can not exceed 3% of the mortgage value.
Well, as with most things government part of this makes sense and part of this is just stupid. The part that makes sense is not guaranteeing mortgages of people who can’t afford to pay them back. That’s how we got into this whole real estate debacle a few years ago to begin with. The parts that don’t make sense is where they decide that mortgage companies can’t charge more than 3% for originating a mortgage. Guess what? It’s going to get damn hard to get a small mortgage come January 10.
And it gets worse. They include in that 3% the cost of buying down your interest rate. So…if you decide to pay your interest up front (which is essentially what a buy down is except you also get some savings down the road) you may disqualify your mortgage from the government sponsored guarantees. Like that makes a lot of sense.
Earlier this week ComplianceEase released the results of a study that showed that 20% of today’s mortgages wouldn’t be qualified under the new rules. About 1/2 of those wouldn’t qualify because of the ability to pay rule and probably shouldn’t qualify. But the other half wouldn’t qualify because of the fees, which is questionable as I point out above.
So it looks like the housing market is going to encounter more headwinds come January.
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