In Evanston, Illinois, where the community offers so much including a university and lakefront homes, the housing market is beginning to show signs of softening while local Realtors fret over the possibility of rising mortgage interest rates.

"Evanston is an urbane lakefront community that features vintage condos and homes," says Realtor Mark Nash. "Downtown, the new construction is near Northwestern University."

Nash suggests, "Real estate consumers are looking at more properties and taking longer to make a decision in the last twelve weeks. The third quarter will bring the remaining buyers to contract in the hopes that the approaching yearly end of market cycle will make sellers more negotiable. First-time buyers are driving entry-level prices upwards, as strong demand often exceeds supply. These buyers have done their homework on the Internet before looking at properties."

"According to a local mortgage banker, rising oil prices are beginning to impact the economy as employers realize the so-called recovery has never taken a strong hold," says Realtor Linda Hoffman. "Nonfarm payrolls rose an anemic 32,000 this past Friday. That's a low for the year and big turn-around from the manufactured optimism earlier this spring. Greenspan recently said the Fed could start raising rates quickly without hurting the economy. The problem is that we definitely do not need another rate hike (we didn't even need the last one), but by doing nothing the Fed would send a signal to the market that they miscalculated. Instead, they will try to convince the markets and consumers that all is well, and hope that they will literally buy into it. The positive in raising rates (and all they raise is the overnight rate that banks charge each other for meeting reserve requirements) is that bonds (long-term rates) will react by falling (a flattening yield curve). The only way the economy doesn't fall into a recession is if the Fed keeps the home market rolling along."

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Published: August 26, 2004

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