The Mortgage Market Today

Chicago mortgage rates are still great.  The conforming loan rates and home equity loan rates in the Chicago area are as follows [varies depending on your credit score]:

Term & Type APR
15 Yr Fixed Call today
30 Yr Fixed Call today
40 Yr Fixed Call today

Home Equity Loan Type Today Last Week Change
Home Equity Line of Credit

Home Equity Loan - 10 Years

Home Equity Loan - 15 Years

Current Adjustable mortgage rates:

Current Adjustable Rate Mortgage (ARM) Indexes

For the
Week Ending Previous Year

6-Mo. TCM

1-Yr. TCM

3-Yr. TCM

5-Yr. TCM


SAIF 11th Dist. COF

HSH Nat'l Avg. Offer Rate

Sources: FRB, OTS, HSH Associates.

Another Mortgage Firm Announces the Closing of Their Offices

It seems like every week in the Chicago real estate market, we hear another mortgage firm announcing the closing of their offices. Take for instance last week, GMAC Mortgage announced the closure all 200 of its retail mortgage offices, discontinuation of its wholesale mortgage broker channel, and trimmed some 5,000 jobs.

Its parent company, Residential Capital Corp (ResCap), had been struggling for some time after losing over seven billion dollars over seven quarters. The company also owns DiTech Mortgage, which may remain. Over 100 firms have disappeared from the mortgage marketplace since the mortgage industry began melting down over a year ago.

Construction Industry, Manufacturing and Employment

Let’s see what else is going on in the construction and manufacturing sector, as well as employment. Construction spending fell by 0.6% in July, with a 2.3% decline in residential projects. The continued decline in residential spending is probably going to stop over the next few months as the inventory levels are tapering off and declining somewhat. Private commercial spending eased by 0.7%.

Factory orders were 1.3% higher in July, for the fifth consecutive month. This should help the economy in the third quarter.

Manufacturing has been unable to breakeven for months despite its strong growth. According to the most recent Institute of Supply Management (ISM) survey, the index of activity for August 2008 was 49.9. In the ISM series, a reading of 50 denotes neither expanding nor contracting activity for factories. For all of 2008, it's been below that line. The "prices paid" subindex; which measures inflation pressure still remains elevated, but has eased over the past two months.

The Federal Reserve's latest survey of regional economic conditions found economic weakness almost everywhere with consumer spending decreasing, with rising prices and weak residential real estate conditions. The Manufacturing sector numbers suggests that the 3.3% GDP in the second quarter will not carry over to the third quarter.

The August unemployment report showed higher weekly claims due to a net job loss of 84,000 jobs, versus a revised 60,000 in July (as well as a revised 100,000 in June). The eighth consecutive month of job losses! The unemployment rate rose from 5.7% to 6.1%, the highest in five years.

Government Takeover of Fannie Mae and Freddie Mac

The federal government's takeover of Fannie Mae and Freddie Mac sent mortgage rates falling this week. The stock market also reacted favorably to the news sending the Dow Jones average up about 290 points. The long-term consequences of the government's takeover remain uncertain at this point. Economists believe that if they had not stepped in the housing crisis may have gotten much worse if Fannie Mae and Freddie Mac collapsed. Interest rates would have gone way up and loans would have been frozen.

Banks have tightened their credit lending guidelines because they have been burned by the mortgage crisis with so many defaulted loans. They have made it difficult for even borrowers with good credit to get loans. As a result, many troubled homeowners have not been able to refinance their adjustable rate mortgages at more affordable rates and have gone into foreclosure. Overall, the credit crunch is making it more difficult for investment in Chicago real estate.

Chicago home sales are increasing and inventory is decreasing so there is some light at the end of the tunnel. Because Fannie Mae and Freddie Mac support the housing market by either buying mortgages directly from lenders, or guaranteeing their repayment, they help increase the amount of money available for home loans. Keeping them solvent and sound means that the recovery the Chicago real estate market and the rest of the country is waiting for should continue through 2009.