More Bad News - Really?


This morning http://www.cnbc.com/ ran the following news stories on their website:

1. New-Home Sales Plunge As Market Still Seeks Bottom


2. Banks Sitting On Time Bomb


3. Mortgage Modifications Soar

NEW CONSTRUCTION DOWN We all know that the real estate market is tough but these headlines ignore a few facts:


If you look at the numbers on the North Shore, the New Construction market in Winnetka and Wilmette peaked in 2005 and 2006, respectively, and then began its retreat. This peak and subsequent decline mirrors the interest rates changes which began to move up aggressively in late 2006. At that point, the real dynamic became "affordability" and many of these homes, often priced at $1.65MM to $1.9MM became too expensive.


The reason this information is important is that our markets (Evanston, Wilmette, Winnetka and Kenilworth) have already reacted to the increased costs associated with new homes and organically slowed the trend. The decline in New Construction has already happened in our area and the local builders are not flooding the markets with over-priced inventory.

BANKS SITTING ON A TIME BOMB is an article that discusses the housing inventory banks hold of homes in foreclosure. The question raised is, "Why aren't these homes listed for sale?" and "What impact will they have on the housing inventory prices when they do hit the market?"

Foreclosures hitting the multiple listing services will not be good for the inventory already on the market, especially the well priced houses. There are over 30 homes in the Wilmette market, for example, that are not on the listing services as foreclosures or even short sales.


While we have many more homes in our communities in foreclosure than ever before, it's not the terrible situation that exists in Florida, California and other "hot" markets. Not necessarily good for us but Wilmette has not seen a rapid or sustained inventory build that would hurt prices.


Check out the articles and remember, we've already adjusted to much of the bad news. Over the weekend I will have the monthly numbers on January inventory and trends. Check back for upates.


DS