“We see a sliver of good news in the growing number of units which are being sold, reflective of the absorption of the distressed properties in the Chicago market. The problem, however, which remains, is inadequate access to financing, with restrictive lending guidelines limiting the number of viable potential buyers from purchasing a home. The guidelines for lending are still not rational and are keeping good buyers out of the marketplace.”
– David Hanna, president of the Chicago Association of Realtors, finding a silver lining in the bleak first-quarter sales report.
The Illinois Association of Realtors released data for home sales for the first financial quarter this morning, revealing that condo and single-family home sales in Chicago dropped 37 percent from the same period last year. The median price of a home in Chicago dropped 26.8 percent in the first quarter to $216,000, compared to the median price of $295,000 in the first quarter of 2008.
The quote from the article which I found irresponsible on his part was,
“Dave Hanna, president of the Chicago Association of Realtors, said irrational, overly stringent lending guidelines continue to keep “good
buyers” out of the marketplace.”
It was the overly loose lending guidelines that led us into this mess. The current lending policies of the companies doing the lending, is now being done in a rational way in which they will make money in the end, i.e. lending to people who put enough down, and have jobs that are able to make the payment each month. Strange concept huh?
Jim,
I don’t know how you can find Hanna’s statement irresponsible without knowing the specific issues he was addressing. I know Hanna to be a careful guy and I’m confident he’s not arguing against down payments or stable employment or being able to handle the requisite payments.
You’d have to be familiar with the details of the guidelines to make your blanket claim that they’re currently ratonal. Are you?
I don’t think his comments were “irrational” but actually find them to be right on the mark. Yes, the guidelines before were certainly overly loose. But it certainly seems that now lenders have responded in a knee-jerk fashion and have become overly conservative and stringent, which has also had quite negative consequences on the housing market as well as the overall economy. Instead of going from one extreme to the other exterme, why can’t lenders operate from a sensible happy medium?
I apologize, I wasn’t at a computer all weekend…
I agree with SIN in that the bank/lenders have knee jerked to an overly conservative way of doing things. However, they have to do this for the time being in order to account for their balance sheets being in disarray (i.e. owning depreciating assets). In order to preserve their businesses, they have to horde cash to make their books balance. This would be the rational thing that they are doing. In due time, things will return to normal… but that time is not going to come overnight. It will be a gradual thing. More people will slowly become eligible to buy a home for the first time and banks with extend credit to more of the financially eligible people soon enough. Banks can’t survive forever acting in their current fashion. Banks make money by lending. And currently they are paying almost nothing for the money they are receiving, so when they do start lending en mass again, they will start to realize huge profits, and down the road, they will continue to ease their lending requirements as the money rolls in. However, it will never be as easy to get a loan as it was 2, 3, 4 years ago. The basic debt/income ratios requirements, proof of job, and credit scores are forever going to be required for obtaining a loan.