Market Conditions: Chicago Sales Drop 11.5% in November- Was it the Weather?

State Street at Christmas 2011

The November 2014 sales data is in and, as expected, sales dropped 11.5% from a year ago. From the Illinois Association of Realtors:

The city of Chicago saw an 11.5 percent year-over-year decrease in home sales in November 2014 with 1,632 sales, down from 1,844 in November 2013. The median price rose to $230,000 versus $200,000 in November 2013, an annual increase of 15.0 percent.

Here is the November sales data for the last 8 years (thanks to G for some of the data):

  • November 2007: 1859 sales and median price of $290,000
  • November 2008: 1093 sales and median price of $222,500 (16% short/REO sales)
  • November 2009: 1905 sales and median price of $215,000 (29% short/REO sales)
  • November 2010: 1144 sales and median price of $182,500 (39% short/REO sales)
  • November 2011: 1429 sales and median price of $157,000 (43% short/REO sales)
  • November 2012: 1750 sales and median price of $180,000
  • November 2013: 1844 sales and median price of $200,000
  • November 2014: 1632 sales and median price of $230,000

(Last year’s press release actually listed 1800 sales and a median of $220,500 so I’m not sure where they’re getting the numbers from on this year’s press release. Those 44 extra sales must have been in the real low bracket to push down the median price by $20,500. But I’m going with what they put out.)

What caused the drop in home sales, which fell statewide, as well as in the Chicago metropolitan area and in the city?

Why- of course- THE WEATHER!

“Illinois’ fourth coldest November on record had a negative effect on housing sales,” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois.  “While prices continue to improve, the sales forecast for the next three months indicates declines on a monthly and annual basis.  Foreclosure sales continue to decline as a share of total sales; good news on the one hand but extending the time for return to pre-bubble levels.”

“As we round out the year, higher median sales prices and low inventory continue to be the market pattern. Buyers are primed to invest in the home that fits their needs despite facing fewer choices,” said Hugh Rider, president of the Chicago Association of REALTORS® and co-president of Realty & Mortgage Co. “Predictions that interest rates will pick up next year should drive both potential buyers and existing homeowners to take advantage now and seize the opportunity.”

Last year it truly WAS the weather with the polar vortex hitting in December all the way through February.

But now the IAR seems to be indicating that sales will again be slow through the winter months.

Interestingly, in this press release the IAR didn’t list what the average 30-year fixed mortgage rate was for the month compared to a year ago. The press release almost always includes this information. For example, here’s what it said in the November press release:

The monthly average commitment rate for a 30-year, fixed-rate mortgage for the North Central region was 4.03 percent in October 2014, down from 4.16 percent in September, according to the Federal Home Loan Mortgage Corp. In October 2013 it averaged 4.20 percent.

Is the IAR setting it up so that no one is disappointed by lower sales over the next few months? Any guesses on when this sales decline stops?

Illinois median home prices increase 6.9 percent in November; Sales decline 9.5 percent [Illinois Association of Realtors, Press Release, December 22, 2014]

22 Responses to “Market Conditions: Chicago Sales Drop 11.5% in November- Was it the Weather?”

  1. “What caused the drop in home sales, which fell statewide, as well as in the Chicago metropolitan area and in the city?”

    Look at this and see if you can tell me the answer:

    November 2012: 1750 sales and median price of $180,000
    November 2013: 1844 sales and median price of $200,000
    November 2014: 1632 sales and median price of $230,000

    VA:F [1.9.22_1171]
    Rating: +2 (from 4 votes)
  2. Affordability chuk. That’s what I’ve been saying the entire time.

    Although- the only thing the median shows is that the upper bracket is doing quite well. I love it that the IAR seems to imply that prices are actually rising. Lol.

    VN:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  3. I think it’s hysterical that they’re blaming the weather for the November drop. The weather! Lol.

    That would mean the weather was awful in September and October. Best I can remember, it was probably like 60 degrees and sunny when these buyers were out looking at properties.

    I doubt cold weather (without ANY snow) prevented anyone from going to their closing to actually buy their properties.

    But you use “the weather” excuse when you have no idea what is going on and why things have slowed. I wonder what the excuse will be this month? Falling gasoline prices? Lol.

    VN:F [1.9.22_1171]
    Rating: +2 (from 2 votes)
  4. “November 2012: 1750 sales and median price of $180,000
    November 2013: 1844 sales and median price of $200,000
    November 2014: 1632 sales and median price of $230,000”

    By the way- this is really:

    November 2013: 1800 sales and median price of $220,500
    November 2014: 1632 sales and median price of $230,000

    It doesn’t look quite so great when you see these numbers versus the ones they put in the press release.

    VN:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  5. It is my belief that if prices hadn’t gone up as much and as fast as they did, you would have seen something like this:

    “November 2014: 1900 sales and median price of $210,000”

    And yes, I know what “median” price means, but I never agreed with the belief that it didn’t show price trends. It’s not just people buying higher end properties. It is also people paying more for the same property as the year before. Median price trends have closely followed the market both on the downside and upside.

    VA:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  6. “I think it’s hysterical that they’re blaming the weather for the November drop. The weather! Lol.”

    agreed

    VA:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  7. The weather was pretty awful for what 2 weeks? Could have very small impact 1-2% maybe, but most likely it is that there are less distressed properties that are selling which aren’t effected as much by seasonality.

    VA:F [1.9.22_1171]
    Rating: +1 (from 1 vote)
  8. I think looking at data in such a short span and trying to make logical deductions is a futile task. I would like to see historical behaviour of the housing market after bubbles to see if a pattern emerges. Then one might want to carefully look at sub markets, high end, vs middles class housing and so on. There are issues of wages (how are they changing for various brackets), population demographic in Chicago, increasing college tuition, etc…

    Btw, seems economic growth is at a local maxima:
    http://www.theguardian.com/business/2014/dec/23/us-economy-strongest-growth-third-quarter-gdp

    VA:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  9. “the only thing the median [going from 220k to 230k] shows is that the upper bracket is doing quite well”

    So, 250k+ = upper bracket?

    Couldn’t it “only show” that crapshacks are selling poorly?

    VA:F [1.9.22_1171]
    Rating: +2 (from 2 votes)
  10. “So, 250k+ = upper bracket?”

    It’s a median. If the median price is going up, but sales are going down, that means that more higher priced properties are selling than lower priced. All it takes is a few extra $1.5 million new construction McMansions in North Center to send the median higher.

    As Crain’s reported yesterday, it’s the most $1 million+ condo sales since 2007. It’s skewing the median price.

    http://www.chicagobusiness.com/realestate/20141223/CRED0701/141229973/high-end-condos-defy-residential-slowdown

    VN:F [1.9.22_1171]
    Rating: -1 (from 3 votes)
  11. “I would like to see historical behaviour of the housing market after bubbles to see if a pattern emerges.”

    There has never been a housing bubble in Chicago except the one we just had. Unless you count the late 1920s apartment binge where the now-co-op buildings went into foreclosure during the Great Depression. But those were apartments. Everyone was a renter in the 1920s and 1930s. There was no Freddie and Fannie to sell everyone on the American dream.

    So everyone is in uncharted territory here.

    VN:F [1.9.22_1171]
    Rating: 0 (from 2 votes)
  12. By the way- 5% GDP in the third quarter? Wow. The economy is hot! Super hot! The hottest it’s been since 1998/1999.

    New jobless claims from last week also dropped to a multi-year low. The 4 week moving average is also still below 300,000. People are hiring even in December.

    VN:F [1.9.22_1171]
    Rating: -1 (from 1 vote)
  13. This is timely.

    Is there an apartment building bubble in Chicago? Was this just sold at the peak?

    http://www.chicagobusiness.com/realestate/20141224/CRED03/141229954/downtown-apartment-tower-fetches-record-price

    It’s the most expensive rental building in the city. It’s 75% leased. But thousands of new apartments are about to come on the market.

    VN:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  14. Thousands of apartments have already hit the market and been absorbed. Honestly I can’t believe that 111 W wacker leased to 75% that quickly. Hubbard place leased out in record time, K2 is full and that location blows, people have to live somewhere and they want new as you say. If the trend is renting, why wouldn’t the downtown area (an area that has increased jobs and population drastically over the last decade) be able to absorb a few thousand more apartments?

    http://www.chicagobusiness.com/article/20130302/ISSUE01/303029987/the-hottest-urban-center-in-the-u-s-chicagos-mega-loop

    VA:F [1.9.22_1171]
    Rating: +1 (from 3 votes)
  15. Oh Sabrina,

    i don’t know why you continue to look at 2013 as a “base year” for number of units sold. 2013 is a year when prices were too low (hence the strong investor presence). Why don’t you look at the average units sold between 1995 – 2005 and create a real base year to reference. Why in your eyes is 2013 the year of the norm?

    VA:F [1.9.22_1171]
    Rating: 0 (from 4 votes)
  16. Sabrina,

    Based on the above article that Sonies posted, what to you think the affect will be on real estate demand? Do you think large companies moving downtown will increase demand in general? Do you think the luxury neighborhoods will see increased demand from the high paying corporate employees?

    Just curious if you understand a general supply / demand curve?

    VA:F [1.9.22_1171]
    Rating: -2 (from 4 votes)
  17. “Last year’s press release actually listed 1800 sales and a median of $220,500 so I’m not sure where they’re getting the numbers from on this year’s press release.”

    I’ve been talking about this for a while. It’s not a new problem. They take their snapshot for the press release on the 7th of the month. In theory to be consistent they should always compare to this same number. But they stopped doing that a while back. Now they compare it to the final number, which always has 40 or so more units that straggle in after the 7th. So they compare preliminary numbers to the final numbers from a year ago, overstating declines by about 2% each month.

    VA:F [1.9.22_1171]
    Rating: +1 (from 1 vote)
  18. The reason the median price is rising so much is the same reason that sales are declining. Far fewer distressed properties are selling so the mix is moving upscale. The distressed properties in Chicago tend to be at the lower end of the spectrum.

    VA:F [1.9.22_1171]
    Rating: +3 (from 3 votes)
  19. “K2 is full and that location blows”

    Right. Amazing actually. All you can do is walk to a Jewel.

    VA:F [1.9.22_1171]
    Rating: +1 (from 3 votes)
  20. “K2 is full and that location blows”

    This was one of the earlier buildings to be built. People just wanted “new.”

    VN:F [1.9.22_1171]
    Rating: -1 (from 1 vote)
  21. “If the trend is renting, why wouldn’t the downtown area (an area that has increased jobs and population drastically over the last decade) be able to absorb a few thousand more apartments?”

    They’ve absorbed so far, but even the builders have admitted that they may be planning too many units. There are simply too many coming on the market. It reminds me of the 10,000 condos that were planned in 2007-2008 in the South Loop before the bust. Many didn’t get built. Those that did were turned into apartment buildings.

    The second quarter occupancy rates for Class A (the most expensive) was at 95.1%. That’s super high. I wasn’t able to find anything about the third quarter though.

    Here’s more from Crain’s:

    Chicago developer Steven Fifield, who built K2, the 496-unit River West tower where the Baugueses live, says the median age in his firm’s buildings has risen to 32, up from 26 just five years ago.

    “Part of the normal turnover in a building happens when people would buy something” and move out, Appraisal Research Vice President Ron DeVries says. “That’s not happening anymore, so they’re aging in place.”

    http://www.chicagobusiness.com/article/20140823/ISSUE01/308239987/downtown-apartments-on-a-five-year-hot-streak

    VN:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  22. “If the trend is renting, why wouldn’t the downtown area (an area that has increased jobs and population drastically over the last decade) be able to absorb a few thousand more apartments?”

    Sonies- it’s ironic that you posted a link to that article about the mega loop because I posted that link like 2 weeks ago when I was asking why the housing market in Chicago is dead even though this is the best jobs market here in 15 years.

    The housing market doesn’t make sense unless you assume all of these new hires are simply renting and then will move out to the suburbs when they have kids- skipping the city buying experience altogether.

    VN:F [1.9.22_1171]
    Rating: 0 (from 0 votes)

Leave a Reply