Market Conditions: Sales Jump 10.1% YOY as the Median Price Continues to Rise

1024 w armitage

The spring market continues to be hot as home sales and median price rose in May.

From the Illinois Association of Realtors:

The city of Chicago saw sales of 2,700 homes in May 2015, up 10.1 percent from last year when 2,453 homes were sold. The median price of a home in Chicago was $287,500, up 6.8 percent over May 2014 when the median price was $269,250.

May sales:

  • May 2008: 2119 sales
  • May 2009: 1557 sales
  • May 2010: 2057 sales
  • May 2011: 1705 sales
  • May 2012: 2037 sales
  • May 2013: 2834 sales
  • May 2014: 2453 sales
  • May 2015: 2700 sales

Median price data:

  • May 2008: $319,500
  • May 2009: $225,000
  • May 2010: $230,000
  • May 2011: $190,000
  • May 2012: $203,000
  • May 2013: $234,000
  • May 2014: $269,250
  • May 2015: $287,500

“Chicago has seen home buyers enter the market with vigor since February,” said Hugh Rider, president of the Chicago Association of REALTORS® and co-president of Realty & Mortgage Co. “The increase in median prices and the relative lack of inventory compared to a year ago show consumers are comfortable with buying in the city and they believe the investment is worth paying a bit more.”

Statewide, the average number of days on the market fell to 72 days from 75 days a year ago. Inventory also fell 6.7% statewide.

Mortgage rates will be interesting to watch. The rates only recently rose above 4% again. Most of the homes that closed in May would have had older mortgage rates.

The IAR said the average mortgage rate for May was 3.82%, up from 3.64% in April but down from May 2014 when it was 4.18%.

Rates should be higher for June and even July closings.

What level do rates have to rise to before we see a real slowdown in sales?

Or do higher rates not really matter with an improving job market and record high stock prices?

Illinois home sales climb 5.6 percent; Median price up 8.7 percent in May [Illinois Association of Realtors, Press Release, June 22, 2015]

 

62 Responses to “Market Conditions: Sales Jump 10.1% YOY as the Median Price Continues to Rise”

  1. May was crazy hot… Homes were going under contract very quickly. Things seem to have changed drastically these last 3 or 5 weeks. Properties are sitting and there have been very few contact signings. I expect July/aug to have a ‘surprise’ drop in closings. No idea where the medium price will be since it’s all about the mix.

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  2. “No idea where the medium price will be since it’s all about the mix.”

    I disagree with this statement. Mix isn’t everything. Median price has tracked the overall market fairly well for the last decade.

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  3. Chuk, median price has tracked well with what metric? Right now I think it’s grossly exaggerating the increases in prices.

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  4. The 10-year is back over 2.4%. Who knows if it will stay there. But it means 30-year mortgage rates over 4%. It’s amazing what even a 0.25% rise in rates will do (or decline in rates, for that matter.)

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  5. I was surprised to see that May 2013 was actually hotter than May this year. There were multiple bids and low inventory in spring 2013 as well.

    But then the bottom fell out when the taper tantrum happened and sales fell the second half of the year.

    Still- I would have thought this year would have been stronger than 2013 given the stories I’m hearing.

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  6. “The 10-year is back over 2.4%.”

    Wasn’t it ‘solidly above’ 3 fairly recently. I seem to remember reading that somewhere…

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  7. but is it “firmly” over 2.4%? cuz I need to know when its a good time to buy bonds lol

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  8. “I was surprised to see that May 2013 was actually hotter than May this year. ”

    What metric are you looking at to determine hotness?

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  9. “Chuk, median price has tracked well with what metric?”

    The anecdotal Chuk-metric. As housing prices fell from 2008-2012, so did median price. Many people dismissed it saying it just meant people were buying cheaper (lower end) houses, but based on what I was shopping for, it seemed to track pretty close. ie, median price was down 25% and the 1/1’s were down from 200k to 150k. Granted, I wasn’t checking if it matched % for %, but there was certainly a strong correlation. The same thing has happened in the reverse, although I agree that my place has appreciated quite a bit more than the median.

    My main point being, I don’t believe you will see a decline in overall house prices and an increase in median price.

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  10. Higher rates won’t matter.

    “The second-largest provider of U.S. mortgages through brokers is bringing back a debt type that’s almost disappeared since the financial crisis: Interest-only loans.

    United Wholesale Mortgage plans next month to expand access to the mortgages to borrowers beyond the wealthiest Americans who use so-called jumbo loans. Interest-only mortgages carry higher risks because they can leave homeowners facing a jump in their bills down the road.

    The move by the family-owned lender, which grew more than 40-fold after the crash by working with brokers as banks such as JPMorgan Chase & Co. abandoned them, is the latest sign of how lending standards are expanding in the wake of the crisis.”

    http://www.chicagobusiness.com/realestate/20150623/CRED03/150629940/interest-only-mortgages-are-coming-back-but-with-safety-in-mind

    As a result, people will be able to buy more house than they normally would.

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  11. @ Mike HG, looking at their proposed guidelines, they won’t be qualifying borrowers off the I/O payment, but the fully amortized payment. They also require 20% down. Higher FICOs, etc.

    This is how I/O loans were before banks loosened the guidelines dramatically to where you could do 80/20 I/Os qualifying off the I/o payment, lower FICOs, etc. The “risk layering” got completely out of control.

    People forget that I/O, pay option ARMs, etc had been around long before the bubble and performed extremely well. Prior to the bubble, they pretty much only went to basically wealthier borrowers and were not sold as an affordability product.

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  12. The article is really about UWM offering i/o to the broker market. You can still get i/o mortgages but mainly only through direct lenders as the investors who offer them typically do not offer the products through true third party brokers anymore. Last time I checked, I think you needed a 70% LTV or less.

    When the bubble burst, the big banks basically threw mortgage brokers under the bus as a scapegoat and saw an opportunity to take back market share they had lost. So Wells, Chase, BofA, and a lot of the other too big too fail banks cut off the small mortgage broker. The end investors are also being held liable for broker actions.

    Brokers have not been been able to compete effectively in the jumbo market due to lack of outlets to place the loans.

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  13. “What metric are you looking at to determine hotness?”

    Number of sales.

    Of course, those are really March sales but that means that March and April of 2013 were hotter than 2015. It feels hotter this year with buyers even MORE desperate. I also think sellers are far greedier- but hey- they’re getting the record high prices, so why not? That’s now the market.

    Record. High. Prices.

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  14. “but is it “firmly” over 2.4%? cuz I need to know when its a good time to buy bonds lol”

    Who would EVER buy bonds? That asset class is in a world of pain probably for decades.

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  15. “Wasn’t it ‘solidly above’ 3 fairly recently. I seem to remember reading that somewhere…”

    I love it that “recently” for you anon (tfo) is almost 2 years ago.

    If that’s true, then “recently” we had a 25% discount in housing prices in Chicago.

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  16. March and April of 2015 were “hotter” than 2013 if you look at closings. March and April contract activity is PROBABLY also higher in 2015. Need to wait for the dust to settle to know for sure.

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  17. “Who would EVER buy bonds? That asset class is in a world of pain probably for decades.”

    Not me, but thats not my super jam, I do know though that many people have been saying for decades exactly what you just said, regardless they have still done well despite their prejudices.

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  18. “almost 2 years ago”

    Not even 18 months:

    http://cribchatter.com/?p=21646#comment-285165

    With a call for that to continue throughout 2014:

    “Yes- the 10-year will be solidly above 3% this year.”

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  19. Quit interfering with Sabrina’s revisionist history @anon(tfo). You remember what a housing bull she was in 2012 right!?!?

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  20. Man, some classic posts in this thread (Note: Feb 2012 basically marked the bottom of the market):

    http://cribchatter.com/?p=13753#comment-227105

    Sabrina? HD? Care to comment?

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  21. the HILARIOUS part about all of the February 2012 thread was that I was under contract on a house the entire time.

    Regardless, there’s still plenty of short sales, 40 year loan modifications and underwater homes out there. That’s why there’s a shortage of homes on the market. Who wants to give up their $350,000 mortgage with $100k balloon at 2.0% a month for the next 40 years? I tell these borrowers that I have a 30 year mortgage at a 4.5% interest rate with a credit score over 830. They have credit scores in the 500’s and they have better terms on their mortgage than I do!

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  22. “the HILARIOUS part about all of the February 2012 thread was that I was under contract on a house the entire time.”

    Yes, and I could tell at the time. I told you back then that you were playing devils advocate to your own position. I found this to be a common occurrence in the stock market where someone would be long a stock, and then bash it on the message boards. This made them feel better mentally because if the stock went up, they made money. And if it went down, they could tell themselves “see, I knew I was right”.

    This also resulted in the “bizzaro HD” we had for a while.

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  23. Don’t over psychoanalyze the bizarro HD too much. It was just fun thing to do. Prices in my ‘hood actually went down for about 3 more months AFTER I bought so I didn’t buy at the bottom. And trust me when I say that although I got ‘deal’ it’s more of a ‘value’ sort of property as opposed to a desirable piece of real estate. It suits me just fine of course but it’s not high on everyone’s list. That’s why it sold so cheap near the bottom of the market in the middle of winter.

    As far as my position of 8-10 years before market recovery, well that was far fetched, because prices are rising. The so called canary in the coal mine though are the loan mods which prevented foreclosure. Just yesterday a 40 year loan mod at 2% with $100k principal deferred came across my desk. That house should have been a foreclosure years ago but thanks to my legal acumen the home debtor now has a lower mortgage payment than I do on a larger principal balance.

    You know the other thing is that we’re all so focused on the high end of the market, and the hot neighborhoods, that we forget about the exurbs, or the far suburbs, or the lower middle class areas that were slammed and still have negative equity, but it’s still a real concern.

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  24. “You remember what a housing bull she was in 2012 right!?!?”

    I never was. I still am not. The bubble is back you’re all just in dream land. How do I know? Units on the El are selling at record high prices in a week while incomes haven’t gone up even 1%.

    Good times.

    But I can document this bubble. That’s what’s so fascinating. I started this blog just after the peak of the last one when things were slowing but everyone was in denial. It was before the market crash but clearly something was “wrong” with the housing market but no one would actually admit it could all come crashing down.

    Why isn’t anyone talking about how abnormal this housing market is? Every thing about it is abnormal. It is even abnormal in the non GreenZone areas where prices are higher and people are in bidding wars. Go to the far out suburbs like Bartlett and Aurora and Elgin. Bidding wars out there too. It’s amazing how much MONEY is floating around. It’s everything thanks to the Fed.

    What will happen this time?

    I think the Fed will let it inflate far longer than anyone thinks (both stocks and housing) until the bubbles become so outrageous they will HAVE to do something and by then it will be too late.

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  25. “Not me, but thats not my super jam, I do know though that many people have been saying for decades exactly what you just said, regardless they have still done well despite their prejudices.”

    That’s what bubbles do, especially in an asset class that has been in a bull for 35 years and there are whole generations of people who have never experienced a bond bear market. They truly believe it can NEVER happen. That they can NEVER lose money in bonds. Why would they think otherwise?

    It’s different this time. Just like in 2005-2007 with housing. Housing couldn’t bust or even go down in value because, in the last 75 years in America, it never had.

    It will be fascinating to see two housing busts within the period of only a decade. I never thought the Fed could do it. I never thought they could reinflate the housing market. But I was wrong. I was $4 trillion wrong.

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  26. “March and April of 2015 were “hotter” than 2013 if you look at closings. March and April contract activity is PROBABLY also higher in 2015. Need to wait for the dust to settle to know for sure.”

    I’m talking about MAY closings and that is it. I can’t believe they are below 2013 (but these would have gone into contract in March and April- so apparently the 2013 market WAS slightly hotter that spring.) I know of people getting outbid left and right in 2013 so it was very hot- and with low inventory.

    And then it all came crashing to a halt when mortgage rates rose that summer.

    Will we have the same scenario again this year? If bond investors believe the Fed really IS going to raise in September, they will continue to push those bond yields higher. The thing is, right now, they don’t believe it will EVER happen- let alone this fall.

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  27. “I never was.”

    Well, at least you can admit you were wrong.

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  28. “The bubble is back you’re all just in dream land. How do I know? Units on the El are selling at record high prices in a week while incomes haven’t gone up even 1%. ”

    Huge percentages of people are still underwater. I see stuff sell every day for less than what people paid for it so I don’t see how we’re in a bubble.

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  29. There are pockets that have recovered nicely. However, I’m still seeing some who bought in 2005-2006 era who are still underwater significantly. Usually the properties have some sort of functional obsolescence, significantly dated, or other major drawbacks. Often times the owners are in total denial as well regarding the value.

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  30. I’m not sure why Sabrina keeps insisting there is a bubble in Chicago. There is no evidence for it.

    Now, if we are talking the Bay Area, DC and other similar markets, I could see the argument.

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  31. How could anyone be underwater after 10 years or mortgage payments?

    If we had a “normal” housing marketing say from 1999 to today, how much more should the average home be worth after 16 years? Let’s take a townhouse in Lincoln Park for example. The area was great in 1999, so there was no gentrification bonus associated with today’s price. In a normal housing marketing, how much more would that townhouse be worth today?

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  32. How could anyone be underwater after 10 years of mortgage payments?

    Easy… you pay $320k for a place 10 years ago. Current value is $240k. You bought with 80/20 i/o and didn’t hardly make any principal payments.

    Even if you did make principal payments, you still might be underwater because mortgages 30 year mortgages amortize with most of the payment going towards interest early on. So even if you did buy with a down payment and were paying p&i, given how much values fell on some properties, you still might be underwater even after 10 years of payments.

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  33. How could anyone be underwater after 10 years of mortgage payments?

    On my end of the spectrum, missed payments and interest and taxes and attorneys fees are capitalized onto the principal balance with a HAMP (or whatever) loan modification. Miss a few payments on the mortgage and watch your equity disappear into the ether.

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  34. “banks would gladly give a loan today so if you ever miss a payment they can take your home away”

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  35. “If we had a “normal” housing marketing say from 1999 to today, how much more should the average home be worth after 16 years?”

    Over 100+ years in Chicago, the trend has been CPI + 20 to 50 bips. Put that on the high side for LP, just because there has been some increased demand for the ‘better’ areas of Chicago (offset partly by higher taxes, more choice for acceptable areas, etc), and run everything thru using the BLS CPI calculator and some maths, and you have:

    + 54.327%

    So, your $300,000 LP townhouse of 1999 would be ‘expected’ to be $465,000 in 2015.

    If you say “no no, for prime areas, it’s more like double (or triple) the average increment over inflation, bc, you know, *average*”, then you get:

    at CPI+100: +66.792%
    at CPI+150: +80.195%
    at CPI+250: +110.087%

    I think that, for a concept of ‘new normal’, +100 is plausible, +150 is stretching and +250 is kooky. So, perhaps one could justify 1999 price + 75% as ‘baseline’ for ‘normal’ growth.

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  36. Thanks anon! That’s really interesting. Perhaps if we look back at pre-bubble prices and calculate what the expected 2015 price would be based on historical data, it would give us a better idea of whether we’re in a bubble now.

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  37. jenny, isn’t that sort of what Case Shiller does? Chicago metro has a long way to go to just recover according to CS. Of course Lincoln Park and Lake View may be at peak again, but they are probably the most desirable places in the whole region to live. I wouldn’t be worried about that.

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  38. “isn’t that sort of what Case Shiller does?”

    1. It’s nominal, not real.
    2. Whole market, rather than submarkets, like LP.

    yes, C-S tells us that the whole metro (less Lake County) isn’t in a full blown bubble, but that tells us very little about mature GZ property, which *could* be (I, too, don’t think it is; certainly some stuff trading higher than seems right, but not super broad).

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  39. “Chicago metro has a long way to go to just recover according to CS.”

    Based on what? CS alone doesn’t tell you that. At some point you have to make assumptions to do a projection of where prices *should* be versus where they are. And the projections can be highly dependent on assumptions especially if you are projecting from pre-bubble, as that is a long time ago now. Or you have to do an @fo like projection, which is itself relying on a CS (or precursor to CS) growth rate.

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  40. “The bubble is back you’re all just in dream land”

    Bubble?

    http://sanfrancisco.cbslocal.com/2015/06/24/mountain-view-man-renting-small-tent-near-google-for-nearly-1000-per-month/

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  41. “[rent-a-tent]”

    Imagine if it were a classy yurt! Or a pool cabana with private bath!

    Speaking of which, what are JMM’s west lake view SFHs renting for these days? Have they hit $10k/month yet?

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  42. I’m not sure why Sabrina keeps insisting there is a bubble in Chicago.

    I’ve said there is no bubble in Chicago. Not yet. But nationally, the bubble conditions/behaviors/prices have returned. We have reinflated the bubble.

    Chicago needs more of a mania for there to be a bubble. We are in a very hot market with record high prices in the GreenZone. If you’re not selling for more, much, much more, then you are an idiot.

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  43. “Huge percentages of people are still underwater. I see stuff sell every day for less than what people paid for it so I don’t see how we’re in a bubble.”

    Who? None that I see but I look only in the GreenZone. Last week I saw some people in Edgewater not getting close to what they bought for in, say, 2002. But that’s not the GreenZone. I felt really sad for them because just a few blocks south of them in Andersonville it’s on fire with prices rivaling Lakeview. And it takes an hour to get to the loop from there.

    Incredible.

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  44. I’ve provided examples of properties in the greenzone that are still below peak prices but every time I bring them up you call them exceptions.

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  45. Gary- I saw one property in 440 N. Wabash in River North listed below the crazy bubble peak in that building (listed under it by like $50,000). But considering that building was INSANE at the peak- the fact that it’s now listed just $50,000 under the insanity tells me all I need to know.

    And just because that ONE unit is listed below- doesn’t mean all of them in that building- or even the building next door- is.

    The GreenZone is above peak prices now. If you can’t see that- I don’t know what to say.

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  46. By the way- I always use this blog as a barometer of market conditions.

    Interestingly- lots of the rah-rahing bulls were around in 2013 (and for good reason- as that’s when the real jump in prices began.) Since the market was dead in 2014, they mostly went away.

    But where are they in 2015? Strangely- even the bulls have figured out that this market isn’t normal. Even they aren’t cheerleading the creation of yet another bubble – which will only end one way- badly.

    By the way- a developer is finally going to build some “affordable” new condos in the GreenZone. Belgravia will be building at Sedgwick & Locust (tearing down an abandoned church there.) 2/2s starting in the $400,000s. 3/3s starting in the $600,000s.

    Could this be the start of bigger things for condos?

    How long before some of the thousands of new “luxury” apartments really become condos?

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  47. Also- according to Crain’s- more homes are listed above $10 million in Chicago and the Chicagoland area than at any other time in history- even more than in 2007.

    Just another sign of too much Fed money moving through the system?

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  48. First property I checked: http://lucidrealty.com/homes-for-sale/Chicago_Lake_View/condos_townhomes/850-W-Aldine-AVE-unit-3/

    Sold for 870K back in 2007.

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  49. Chinese stocks, which had been up 60% year-to-date as of June 12, have fallen 20% in the last two weeks, so the WSJ reports investors are calling for “Big Mama” to come to the rescue:

    “On Thursday, in an apparent move to calm the market, the PBOC, dubbed Yang Ma, or Big Mama, in China, injected 35 billion yuan into the system by using open-market operations for the first time in two months.”

    http://www.wsj.com/articles/peoples-bank-of-china-cuts-rates-1435397932

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  50. Today might be like one of those Sundays when Bear Stearns, the GSEs, and Lehman Brothers were collapsed.

    http://dollarcollapse.com/money-bubble/on-monday-its-china-versus-greece/

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  51. “Sold for 870K back in 2007.”

    BUT:

    1. that price was INSANE at the peak, or

    2. Seller was an idiot, or

    3. Not *really* the GZ.

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  52. Maybe the 2013 bulls aren’t around because most got tired of reading your cherry picked anecdotes to support your ill-though Fed rants.

    Plus, they probably bought in 2013 and are feeling quite alright about it.

    https://www.google.com/trends/explore#q=crib%20chatter

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  53. June hit a 9 year high in home sales: http://www.chicagonow.com/getting-real/2015/07/chicago-real-estate-market-update-highest-home-sales-in-8-years/

    Inventories just keep moving lower. It’s rather incredible. What’s also incredible is the growth in non-distressed sales. I think by the time we get to August the effect of the decline in distressed sales will be much less and we will be reporting really strong sales numbers.

    Market times are not moving all that much.

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  54. ” I think by the time we get to August the effect of the decline in distressed sales will be much less and we will be reporting really strong sales numbers.”

    But…but…but…what about shadow inventory?!

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  55. Yeah, it’s not like that’s all going to suddenly be dumped on the market.

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  56. What Treasury rates doing?

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  57. Inventory may also be so low because of the short market time?

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  58. The two are absolutely tied together. What’s surprising though is that the market times have not dropped significantly, while the inventory has. I think it’s because sellers are seeking higher prices.

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  59. “Yeah, it’s not like that’s all going to suddenly be dumped on the market.”

    Just wait until the beginning of the next recession with the layoffs and the jobcuts; and those who have their loan mods default for the 2nd or possibly 3rd time.

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  60. “The two are absolutely tied together. What’s surprising though is that the market times have not dropped significantly, while the inventory has. I think it’s because sellers are seeking higher prices.”

    When we say inventory is low, what are we comparing it against?
    Could it be that the high inventory during the housing bubble was an anomaly?
    How does the current inventory compare to historic ones (appropriately normalized by number of houses, population, et…)?

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  61. We’re comparing it against historic levels. You can see the graph in my blog post. It’s also low relative to national norms that go way back.

    And it’s always measure in months of supply so it is normalized for activity level.

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  62. “I think by the time we get to August the effect of the decline in distressed sales will be much less and we will be reporting really strong sales numbers.”

    Distress sales have certainly come down. You can tell that investors are moving out of the game by what the big funds are doing. It’s been awhile (a year or two) since I’ve seen an article in the Chicago press about the big funds buying hundreds of houses around the city or suburbs to rent out. Nationally, all anyone is talking about is how they want to now sell.

    The percentage of cash buyers is also down from its all time highs just 2 years ago. It is still historically high, over 20% of buyers, but falling because investors can’t find any deals anymore with prices at new record highs. The numbers don’t make sense for them to buy anymore, even with rising rents.

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