That said, Cook County faces two new threats that other counties won't that makes its future real estate prospects even more dire. The first is SB 1167. This is well meaning but totally misguided state law that attempts to limit fraud but creates a whole new level of bureaucracy that makes already difficult loans even more difficult created by the state of Illinois. SB 1167 applies only to the entire County of Cook. It creates all sorts of new rules and regulations associated with loans in that County including mandatory counseling for any borrower prior to closing on a loan. SB 1167 is the reincarnation of another bill, HB 4050. Unlike SB 1167, HB 4050 was only done in a limited number of zip codes. HB 4050 was nothing short of an unmitigated disaster. It was only implemented for a couple months. Not only did it cause great consternation in mortgage brokers, but many banks refused to lend in said zip codes altogether. As such, here were the sales figures after the first month.
60620 experienced a 43% drop in sales
60621 experienced a 25% drop in sales
60623 experienced a 57% drop in sales
60628 experienced a 15% drop in sales
60629 experienced a 63% drop in sales
60632 experienced a 34% drop in sales
60636 experienced a 41% drop in sales
60638 experienced a 54% drop in sales
60643 experienced a 49% drop in sales
60652 experienced a 43% drop in sales Compared to September 2005, one year ago, sales were also down 45% in the target zip codes.
Now, keep in mind that HB 4050 was implemented in 2005 while the market was booming. SB1167 has only been in effect a few weeks however given the nature of real estate now, this new law is like pouring gasoline on a hot flame.
The next problem is adverse markets. These are areas that Fannie Mae and Freddie Mac feel have dropped in value more than most. As such, those areas face extra restrictions on new loans that other areas won't. For instance, all loans will be restricted by 5% less loan to value in these areas. (thus, if a loan normally allows 90% LTV then in these areas it will only allow 85%). Beyond that, there will be restrictions on fees, credit, and most importantly appraisals. In fact, it is so restrictive that some properties will be impossible to do. The sum effect is that not only will it again be more difficult to do loans, but it will also be more difficult to get higher values approved with Fannie Mae and Freddie Mac. Since those two control the overwhelming majority of the market, this means this policy will put extreme downward pressure on prices in any area deemed an "adverse market".
Now, anyone that has taken an economics class knows that during periods of economic weakness we want the government to engage in expansionary policies. In other words, if the economy is weakening, the government should cut taxes and the Federal reserve should lower interest rates. Now, what the state of Illinois along with Fannie/Freddie have done is engaged in contractionary policies during a time of weakening in the real estate market. In other words, they are doing the exact opposite of what they should be doing to bring the real estate market out of its weakness, at least in Cook County. What this means is a total and unmitigated disaster for Cook County real estate values. Wherever you live watch out for such misguided policy for it will absolutely destroy your real estate right as it is weakening.
Well Mike. Don`t worry. It`s not just Cook County. It`s happening all over the place. And not just the U.S. . In a smaller degree and rather slower, it`s happening also here in Canada. I`m a realtor in Toronto and I can tell you, that you are not alone. Our market is becomming a buyers market and listings are up, sales are way down and prices are dropping. And with the 40 year mortgage canceled, it`s going to destabilise even more. But In the future sense, this is good. It`s like a market reboot. And the same thing will happen in Cook County, so don`t worry.
Isn't Cook County Obama's district? The same policies that Cook County has are the very same policies Obama is pushing in his campaign. It is all the complete opposite of what needs to be done right now and congress is leding the charge.
Since he is a U.S. Senator, every district is his district. His district when he was a state senator his district was in Cook County though he had a small portion of the county.
I wouldn't say that his policies mirror these. Fannie and Freddie set their own rules. I am sure that SB 1167 is something he would have supported but I don't know that he ever pushed such an idea.
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