Market Conditions: Chicago November Sales Fall Just 1.4% YOY While Inventory Plunges

State Street at Christmas 2011

The Illinois Association of Realtors is out with the November sales data.

While the country, the state of Illinois, and the 9-county metro area all saw sales take a steep dive in November, the City of Chicago held up well.

The city of Chicago saw sales of 1,615 homes in November 2015, down 1.4 percent from last year when 1,638 homes were sold. The median price of a home in Chicago was $235,000, up 2.2 percent over November 2014 when the median price was $230,000.

“Median prices in the Chicago market posted a strong showing in November, boosted by a lower number of properties from which to choose,” said Dan Wagner, president of the Chicago Association of REALTORS® and senior vice president for government relations for The Inland Real Estate Group. “To see inventories drop more than 16 percent year over year in Chicago clearly signals that buyers want to start the new year in a new home.”

Here is the November sales data for the last 9 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: 1638 sales and median price of $230,000
  • November 2015: 1615 sales and median price of $235,000

“Median prices continued to increase even though sales declined on both a monthly and an annual basis,” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. “Much of this decline can be attributed to the significant drop in the sales of foreclosed properties.  Adjusted for inflation, house prices in Illinois have recovered to 91 percent of their November 2008 level; the comparable figure for Chicago is 84 percent.  At current rates of growth of prices, recovery will take between 12 and 18 months in both cases.”

Money continues to be cheap. The average 30-year mortgage rate actually fell year over year to 3.93% from 3.98% in November 2014.

Real estate agents around the country have blamed falling inventory for the slower pace of sales in November.

What does this mean for the 2016 market?

Why aren’t builders building like crazy if the demand is there?

Illinois home prices see uptick in November; Sales dial back [Illinois Association of Realtors, Press Release, December 22, 2015]

72 Responses to “Market Conditions: Chicago November Sales Fall Just 1.4% YOY While Inventory Plunges”

  1. builders do seem to be building in the green zone like crazy in my hood there are cranes everywhere you look in all directions

    hasn’t been like that since 2006

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  2. “Real estate agents around the country have blamed falling inventory for the slower pace of sales in November.”

    and the new loan disclosure requirements for the slow pace of closings.

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  3. The Trib has an article called “Chicago home prices driving buyers to suburbs” (article link behind paywall so Google News link provided instead…)

    https://www.google.com/search?hl=en&gl=us&tbm=nws&authuser=0&q=Chicago+home+prices+driving+buyers+to+suburbs&oq=Chicago+home+prices+driving+buyers+to+suburbs&gs_l=news-cc.3..43j43i53.1159.1159.0.1691.1.1.0.0.0.0.61.61.1.1.0…0.0…1ac.1.Se51XM16iJ0

    I feel like the article was talking to me. All the same reasons I moved from Chicago in 2011/2012 are discussed in the article (high home prices, better value in amenity rich suburbs, bad schools, rampant crime).

    I think this article probably captures why sale volume is dropping and price increased has slowed. Buyers and sellers both can’t get the prices they want in the city anymore and are now looking elsewhere.

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  4. From HD’s article:

    “two to three times less”

    WTF is wrong with people? That doesn’t mean *anything*; it’s just evidence that the author is innumerate.

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  5. Also re HD”s article:

    The place they bought is a total fixer, too, and the taxes are almost half of their old rent.

    Not that it was a bad decision–if I were looking for a sub-$2k monthly housing cost, and had two kids, I would be off to the burbs, too.

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  6. City living is over rated. I’d much rather live in an inner burb.

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  7. TRID is a convenient excuse, but I haven’t seen where it would have slowed down closings. However, it does show the incompetence of the CFPB and govt bureaucrats in all their glory.

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  8. to each their own

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  9. “TRID is a convenient excuse, but I haven’t seen where it would have slowed down closings”

    And yet, the realtors are blaming TRID:

    “And according to the latest report from the National Association of Realtors, those closing delays helped considerably slow down existing-home sales in the month of November.”

    http://www.housingwire.com/articles/35879-the-trid-effect-is-real-existing-home-sales-fall-sharply-in-november

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  10. “Why aren’t builders building like crazy if the demand is there?”

    Because I don’t think the significant demand is for condos, and that’s mostly what the builders are building right now. I think the higher demand is for single family homes in specific green zone locations. Those cannot be so easily built.

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  11. All TRID does is slow down the process, but it isn’t like people stopped buying homes because of TRID. Most consumers have no clue what TRID is and probably don’t care. I’ve yet to hear any loan applicant say, “I want to a buy a house, but this TRID regulation sure is making it difficult”

    The NAR loves to make specious connections to slower home sales.

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  12. My housing payment isn’t sub-2K and I live in the suburbs. THANK YOU MAINE TOWNSHIP.

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  13. “Because I don’t think the significant demand is for condos, and that’s mostly what the builders are building right now. I think the higher demand is for single family homes in specific green zone locations. Those cannot be so easily built.”

    But if that were true, then condo prices wouldn’t be soaring and inventory for condos wouldn’t be at record lows either. But it is.

    I definitely agree that some buyers want other product, like townhouses and single family homes. They just sold out a bunch of $800,000 new construction townhouses right in the middle of River North. So they ARE finding the land and building.

    But they’re choosing to build new apartment towers rather than condos.

    And there’s very little new construction outside of the GreenZone even though there’s demand there. Those $500,000 townhouses in Old Irving Park are mostly sold already, aren’t they?

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  14. Good article homedelete.

    This really tells the tale:

    “We were looking (in the city), but we couldn’t find anything in our price range, which was under $350,000,” Keskitalo said.

    Because they COULD find something in their price range but it would be outside the GreenZone where, let’s be frank, the schools stink and there aren’t great restaurants to walk to and you’re taking the bus. Could they buy a bungalow in Portage Park for the $300k-$350k range? Sure. But the schools and the amenities are nicer in River Forest where they ended up.

    Same with the Wicker Park home owner in the article. Her budget was $500k to $600k. They wanted to stay in the neighborhood as they already had a 3/3 condo. But they would need to move up to a single family home and those are $1 million plus in that area (especially for more space.)

    Where’d they end up? In a 4500 square foot McMansion in Naperville!

    Wow. Crazy.

    But will they have to fight to get their child into Park District classes the same way you have to in Chicago? Probably not.

    These families all seem fairly well off to me but they’re not upper middle class. And unless you really have the $200k+ salary, the city is just too difficult with kids. And prices have risen too high in the neighborhoods where you can try and make it with decent schools.

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  15. “builders do seem to be building in the green zone like crazy in my hood there are cranes everywhere you look in all directions”

    Yes but it’s 5,000 to 7,000 brand new apartments, for the most part.

    They are building about 400 luxury condos ($1 million+) but nothing is being built that is “affordable” even to a young, urban professional. And that is a drop in the bucket compared to the new apartment buildings.

    Usually, when the condo market heats up, they start converting the rental buildings into condos. But that hasn’t happened yet. Maybe in 2016?

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  16. “Yes but it’s 5,000 to 7,000 brand new apartments, for the most part.”

    Didn’t you say that no one should be buying at these 1/1 and 2/2’s in the city? So, isn’t that a good thing?

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  17. “Usually, when the condo market heats up, they start converting the rental buildings into condos. But that hasn’t happened yet. Maybe in 2016?”

    I don’t think so – many in the new generation (20s/early 30s) don’t want home ownership at all – they will pay extra for the convenience and flexibility of renting.

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  18. 4500 sq ft in the suburbs isn’t that big when you include the finished basement. it’s just a bigger house like virtually every other house in naperthrill. $600000 for 3,000 above
    ground space is only $200 per sq ft, about half the price of hot hoods in the city.

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  19. their monthly nut is likely significantly higher where they are now than before.

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  20. “City living is over rated. I’d much rather live in an inner burb.”

    What inner burb(s)? How far is an inner burb meaning does Oak Park qualify, but La Grange doesn’t?

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  21. unless you have a family of 8 why do you need 4500 sqft

    jesus

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  22. “City living is over rated. I’d much rather live in an inner burb.”

    Russ – While I agree somewhat about the inner burbs comment city living is not overrated!

    We purchased our inner burb house in late 2014 and spent time getting it remodeled before moving in last May. It was clear that this would be a huge change from our Fulton Market loft and we were quite hesitant to change. Perhaps we even stalled a bit. Right before we actually moved in our new next door neighbor asked politely if we were ever going to actually move in to this great home.

    In the end it is a really great place to raise our family. Backyards and basements work great for little kids unlimited energy. Not having to fight to get them into park district programs still throws my wife off. She sets alarms to be the fist to sign up and then laughs when there are still openings three weeks later.

    Living there is not like living in the city. Not even close. I as pleased to see that my wife had quickly adjusted to the train schedule. The lack of walkability to work that I thought would be a big concern ended up not being the end of the world. However the quality of amenities in our sleepy burb is limited. Last Monday I struggled to find a decent option to deliver food via Grub Hub. Looking at the options to our address was almost a joke. Especially compared to the city. That is not overrated.

    Where I agree with Russ most is that the “inner burbs” really are a decent option. We still go downtown almost every weekend. And taking the Metra down and Uber home has become the staple protocol in our house. This is a great benefit of being close in to the city as it would be much harder to do that in Kildeer, Naperville, or Lake Forest.

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  23. Many of these suburbs don’t have Instacart! How does anyone live without it?

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  24. Jp3, I agree. I had the grubhub experience (or lack thereof) recently. However, at least where I am in Oak Park, I feel like the dining options are good enough and it really isn’t a big deal to get into the city. Between the additional space, parks, quiet, good public schools, easy access to metra & two EL lines, I just feel like I’m getting overall better value for the money.

    Unless one can really afford a single family right off the shopping strips in the heart of the greenzone, I just don’t see where it is worth it. I see people buying houses say in West Town, west Lincoln Park, etc and I’d argue they don’t have any more walkability than I have in Oak Park, have to send their kids to private school, fewer parks, small lot, etc. Many of the city restaurants are opening in the inner burbs. Oak Park is getting a Nando’s Peri Peri soon. Some city bbq place and a few others.

    If you don’t have a family, I can see where it make sense to stay in the city. But no way I’d trade my house for a 2/2 or even 3/2 condo at this point in my life just so I can be a little closer to a few hip restaurants.

    I think there is a big difference between living in say a subdivision of McMansions near strip malls vs a suburban village with an active downtown.

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  25. “they already had a 3/3 condo [in the city]… Her budget was $500k to $600k… Where’d they end up? In a 4500 square foot McMansion in Naperville!” – for *THREE* people!

    This is a prime example of the suburban cultural mentality that permeates the city now that urban living has became popular again with the educated masses: you arrive here here being used to a certain style of living, realize that you’ll never be able to duplicate that style of living, blame it on the high cost of living, return to where you really belong.

    City living is all about sacrifice – *nobody* ever gets what they want nor think they need. You’ll never have enough room, never enough parking, never enough closet space, never enough kid space, never enough of the anything you grew up with or think you deserve as a well paid working adult. It a sort of social litmus test – you either assimilate to its ways or you leave. Fine, then go, nobody really cares, but do not try to assert that your lifestyle choice was forced upon you due to lack of funds – you are not like the poor who have no choices, you are and always will be suburban… now with a failed-attempt-at-urban-living-story to share at your next cookie party.

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  26. “you arrive here here being used to a certain style of living, realize that you’ll never be able to duplicate that style of living, blame it on the high cost of living, return to where you really belong. ”

    Great comment coming from the guy who bought a house in LP 30 years ago….! Go tell that to the former residents you displaced with your gentrification, and now nearly all of the area’s former residents have been priced out of your neighborhood. Where do those former residents belong, the slums?

    And the irony is that your neighborhood costs $1,000,000+ for a SFH or $400+ for a tiny 2/2, yet you’re the one telling them to go back to the suburbs because they complain that 1,200 sq condo doesnt have enough closest space!

    And while you’re at it, get off my lawn!!!

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  27. “Fine, then go, nobody really cares, but do not try to assert that your lifestyle choice was forced upon you due to lack of funds – you are not like the poor who have no choices, you are and always will be suburban… now with a failed-attempt-at-urban-living-story to share at your next cookie party.”

    Coming from the guy with the million dollar home in LP!

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  28. “And there’s very little new construction outside of the GreenZone even though there’s demand there. Those $500,000 townhouses in Old Irving Park are mostly sold already, aren’t they?”

    East Village and Ukrainian Village are full of new construction SFHs. Of course, most that sit on full size lots are now priced at $1.3 – 1.4 MM.

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  29. Whether or not city living is overrated depends totally on what you are used to and what you value. I grew up in Dallas so Chicago blows my mind. How can anyone think that a 25 foot wide lot is normal? How many floor plans can exist on a 25 foot wide lot? Houses that are 5 feet apart so that there’s no light coming in from the sides of the house? Rats running through the alleys. Leave your garage door open for 5 minutes and everything worth more than $5 is gone. Thankfully, your garage is so small that you can’t store much of anything in it anyway but pulling in and out of it requires 16 back and forth maneuvers. Not to mention that when it snows heavily there is no place to put alley snow. Transportation is a perpetual nightmare. No parking, bad traffic, potholes, and public transportation never connects where you are to where you are going in a reasonable amount of time. And if you are expecting a UPS package you better hope they don’t leave it on the front porch because it will not last longer than an hour or two. And speaking of mail…the postal system here is third world quality. Most grocery stores here are less than 1/2 the size of grocery stores elsewhere so you have traffic jams in the parking lot and in the aisles and food selection is limited. And for all this you pay 2 -3 X what you would elsewhere for the same quality housing – not to mention the property taxes, income taxes, and sales taxes that are higher than many places.

    But after you live here long enough this all becomes normal and you learn how to deal with it. You avoid the roads during rush hour and use Google maps to plot any course over 1 mile the rest of the time and you use Amazon Prime to buy everything you can’t get in a grocery store. You memorize where all the street parking is. And you remind yourself to take advantage of what the city has to offer because it’s too easy to forget it. And you make yourself feel better by pretending that anyone who doesn’t live in a city is a hillbilly.

    Clearly the city is not for everyone. People who visit here from other places often ask how we deal with it.

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  30. Gary…but you get all the culture the city has to offer at your door step! Nevermind you need to work in a profession that requires 60-80 hour work weeks so you have little time to partake in the “culture”. City culture really means being able to order really good Korean BBQ on Grubhub after 9pm when you get home from work. Sarcasm off…

    I’m convinced city folks tell themselves they are enlightened to make excuses for accepting such shitty living conditions.

    Try having this same convo with someone living in NYC. Nothing you say will make them think it is abnormal to be paying $10k/mo in rent for a crappy 2 bedroom that is barely 900 sqft.

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  31. I wonder how the retirement savings of urban dwellers compares to the retirement savings of suburban dwellers. Something tells me that urban dwellers are going to have their hand out when it’s time to retire.

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  32. Russ said: I’m convinced city folks tell themselves they are enlightened to make excuses for accepting such shitty living conditions.

    Russ you are wrong. Living in the city of Chicago has a multitude of benefits. All of the museums, culture, art, sport events, world class restaurants, etc. are within 30-45 minutes away. The high cost and high taxes is driving out the poor and the rich are moving in. Chicago is going to be the next Monaco of the Midwest. All the rich and educated people from the Midwest want to move to the city of Chicago. Millennials want to live in cities and not in boring, bland, homogenous suburbs. America’s cities are coming back in a big way. Houses for a million dollars plus and condos and houses for over 600K are sprouting up like mushrooms. Even by 3500 S. Halsted there are huge new housing developments where houses are 600K to 900K. Who do you think is buying up those houses like hotcakes? This time the market truly is different.

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  33. there’s a middle ground between ‘the city’ and Schaumburg. it’s called the inner burbs with nice amenities. I still go to the city everyday for work and I go out often, I just don’t make it to the newest sushi place in lakeview like I used to. now I’m going to the new local pizza parlor with the fam instead.

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  34. A burb is a burb is a burb is a burb. Inserting inner before it does not change the fact.

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  35. Miumiu – you are correct that all burbs are burbs but being in the inner ring has advantages. There are at least some people that are city minded and actually WANT to go into the city for culture recreation and dining.

    My cousins grew up in Arlington Heights with a metra stop that took them downtown quickly but they NEVER went downtown unless my family was dragging them down. As kids we grew up in Edison Park and were never afraid of that big bad downtown. I wne to Cubs games on the el with my biddies in 4th grade. And that was with my mothers blessings. Times sure have changed.

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  36. Home delete – Is that new suburban pizza place in a former men’s clothing store? Been planning to try that place out.

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  37. “Something tells me that urban dwellers are going to have their hand out when it’s time to retire.”

    Why do you say that? Many urban dwellers actually can age in place. When they can’t drive there are buses, taxis, Divvy bikes, uber. If you live in a high rise and you bought your condo in 1975, you can age in place very easily in the city.

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  38. jp3 – yes. good place but usually loud and crowded. worth going

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  39. “Clearly the city is not for everyone. People who visit here from other places often ask how we deal with it.”

    Where are they visiting from? The suburbs? Or big southern cities like Houston?

    Because how you described Chicago is the same description as San Francisco, New York, Boston, Washington DC, Philadelphia, and Baltimore. (Probably other cities can be in that list too.)

    It’s urban living. My grandparents somehow managed to raise 7 kids in Jefferson Park. Go figure.

    But a lot of the inconveniences you describe are why everyone rushed to the suburbs in the 1960s and 1970s. The demographics are now saying that the urban centers are where it’s at again (most likely due to the lowest crime in decades).

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  40. “East Village and Ukrainian Village are full of new construction SFHs. Of course, most that sit on full size lots are now priced at $1.3 – 1.4 MM.”

    Not this again. How many times do we have to discuss the building of McMansions in a few select neighborhoods? This ISN’T “real” construction. Building 20 $1.5 million new construction homes (yes- they are building them in Lakeview as well) is an ant on the earth. It’s barely even a statistic. Building 5,000 condos on Wolf Point is a statistic. That is actually meeting demand (too bad they’re building rentals there.)

    This is a city of over a million people. Building 20 homes is nothing. New construction, citywide, is actually near all time lows. Why? Construction isn’t. They’re just building rentals now instead of for sale housing.

    There is plenty of land to build large scale townhome and SFH developments outside of the GreenZone. In fact, just recently they announced more townhouses going in in Logan Square (whether or not LS is actually IN the GreenZone now, remains up for debate.)

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  41. “Unless one can really afford a single family right off the shopping strips in the heart of the greenzone, I just don’t see where it is worth it. I see people buying houses say in West Town, west Lincoln Park, etc and I’d argue they don’t have any more walkability than I have in Oak Park, have to send their kids to private school, fewer parks, small lot, etc. Many of the city restaurants are opening in the inner burbs. Oak Park is getting a Nando’s Peri Peri soon. Some city bbq place and a few others.”

    I would actually argue that some inner suburbs like Oak Park and Evanston actually have BETTER restaurant/pub options than many of the “prime” north side neighborhoods like Southport. Walk down Southport now. It’s chain heaven. Everything local is closing due to the jacked up rents. And very few of the restaurants in Lakeview, for example, ever make the Michelin guide even with a Bib.

    Oh- but I forgot- you can ride your bike to Wrigley so that makes all the sacrifice to live in Chicago worth it.

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  42. “I don’t think so – many in the new generation (20s/early 30s) don’t want home ownership at all – they will pay extra for the convenience and flexibility of renting.”

    Then who will buy all the homes the baby boomers will sell to retire to Florida or when they die? No one? Or will those be rented out too?

    I agree that the millenials aren’t as into buying as other generations but isn’t it really because they can’t come up with the $15,000 downpayment to close on it?

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  43. “Where are they visiting from? The suburbs? Or big southern cities like Houston?”

    Small towns and smaller cities like Dallas.

    “Why do you say that? Many urban dwellers actually can age in place.”

    It should be a function of housing cost burden and not just urban vs non-urban but they appear to correlate. And the picture for rentals is different than the picture for home ownership. But my point is that if you spend a higher percentage of your income on housing then you can’t save as much for retirement.

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  44. Only place in the ‘green zone’ that is “affordable” to purchase ironically, is Cabrini Green

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  45. “Then who will buy all the homes the baby boomers will sell to retire to Florida or when they die? No one? Or will those be rented out too?”

    It’s a total myth that most retirees (or even a significant percentage) retire and move to a warmer climate – very very few people leave where they have lived most of their lives and where they have raised their kids. Those with money MIGHT buy/rent a winter home, but those folks will usually keep a place within their hometown. It’s not my opinion – it’s actually a fact.

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  46. So I live in an expensive neighborhood HD, what of it? It certainly wasn’t always like that and few here would have ever taken the huge financial risk I did at such a young age (11.5% interest to add even more insult) in an area that held little, if any, promise of future financial return. The real winners were the still braver people who bought in the 60’s & 70’s and sold for 22x their original purchase price – as was the case with my house. These people weren’t gentrified out of the neighborhood because the homes themselves became expensive, if they were pushed out it was because of skyrocketing property taxes.

    The real irony here isn’t that entry level homes in my neighborhood are now $1MM, but that this neighborhood, like most in the city, was built by and for the working and middle classes. Other than a few scattered Victorian mansions, these areas weren’t Lake Forests in the city and we aren’t discussing “remember when you could buy an Adler for only $4MM back in the 80’s?” The real irony is that we’re discussing why say a small workers cottage in Old Town that (almost) nobody wanted just a couple of decades ago is now selling at $1.2MM, and therein lies the rub: something that was once so common as a small place in a human scaled neighborhood that’s also architecturally pleasing, culturally stimulating, close to employment, walkable, relatively safe, close to decent schools – shouldn’t really be reserved for only the wealthy, but it is and there’s little hope of a reversal anytime soon. What’s happening in the GZs and soon to be GZs says a lot more about the failures of the suburbs than it does about the successes of the city.

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  47. “The real irony is that we’re discussing why say a small workers cottage in Old Town that (almost) nobody wanted just a couple of decades ago is now selling at $1.2MM”

    Debt has soared on the back of cheap money.

    It’s not a coincidence that housing prices skyrocketed once you no longer needed 20% down (and 0% or 3% would do) and once the mortgage rates went to record lows. Take a look at Shiller’s home price chart that goes back 100 years. You’ll see that the last 15 to 20 years are completely abnormal nationwide.

    And we’re still in the midst of it.

    If everyone thinks that this housing market is “normal” and that the Chinese are going to come buy up all the Lakeview condos which will keep housing prices elevated, then I have a bridge to sell you in Brooklyn.

    This bubble 2.0 is really not that different than what we experienced the last time. Bubbles are caused by ease of credit. We have those same conditions again- it’s just a different “easing” than the last time. Last time, 0% down and all interest loans. This time record low mortgage rates.

    It can only go so long. Bonds are at the end of a 30 year bull run. They will go into a bear market for decades if history is any guide.

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  48. “Those with money MIGHT buy/rent a winter home, but those folks will usually keep a place within their hometown. It’s not my opinion – it’s actually a fact.”

    Really? That’s amazing. I guess every time I go to Florida and meet all those people from New Jersey I must be imagining things. Or I guess all those Chicagoans who live in Arizona (so much so that Lou Malnati’s is opening up down there) are a mirage. Maybe they’re all going and renting places for the winter. Or I guess they’re all rich and buying a second home somewhere.

    My mistake. All those articles with the demographics showing that the sunshine states have been gaining population over the rustbelt for years must be wrong.

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  49. “But my point is that if you spend a higher percentage of your income on housing then you can’t save as much for retirement.”

    So what do all the New Yorkers, Los Angelenos, San Franciscans, and others who live in the REALLY high cost cities do? They don’t have ANY retirement? They live in the poor house? They move in with kids?

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  50. “Inner burbs”: I prefer “transurban areas”

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  51. “So what do all the New Yorkers, Los Angelenos, San Franciscans, and others who live in the REALLY high cost cities do? They don’t have ANY retirement? They live in the poor house? They move in with kids?”

    Not everyone who lives in those cities is spending a huge percentage of their income on housing. Some people just make a lot of money and that’s why price are so high. But anyone who IS spending a lot on housing mathematically can not be saving for retirement. So at some point the piper will be paid.

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  52. “Not everyone who lives in those cities is spending a huge percentage of their income on housing. Some people just make a lot of money and that’s why price are so high.”

    Yes they are. My friend was renting a 2-bedroom apartment in Queens without even laundry in her building for $1900 a month 4 years ago. Prices have only gone up since then. (And this was NOT luxury.) She moved back to Chicago because it was so absurd there.

    I thought you’ve said your daughter is in the Bay Area. You MUST know what goes on out there then, right? The average price of a home has been way above incomes for at least 15 years. Unless you live in Sacramento, you’re not buying anything under $500,000 (including condos). Even in places like Concord, you’re still spending $300,000+ even after the dot.com bust or the recession. And prices have gone up there again (for those who don’t know Concord = Aurora.)

    Why does everyone think that everyone in Silicon Valley is rich? How much does your daughter make? $85k? If she’s an engineer, she will max out around $125k to $150k. Are you buying the million dollar peninsula home with that income? I don’t think so.

    So- I’m just wondering- does NO ONE retire in the Bay Area? I guess it will really be about Generation X. The Baby Boomers who bought houses there in the 1980s and 1990s are rich from their house. I knew a legal secretary who bought a house in Mill Valley in 1983 for $150,000. It’s now worth $2.5 million. But the Generation Xer or Millenial who buys it from her at $2.5 million probably won’t be so lucky.

    Unless prices keep going up, up, up.

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  53. “anyone who IS spending a lot on housing mathematically can not be saving for retirement”

    Sure some of them are–it’s just thru a very poor vehicle: home equity.

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  54. “If she’s an engineer, she will max out around $125k to $150k.”

    Not that it affects your point about the affordability of housing, but:

    [From a 2 year old story:] “Recruiter Scott Purcell says the software engineers he’s placing typically make a base salary of $165,000.”

    http://www.businessinsider.com/a-google-programmer-blew-off-a-500000-salary-at-startup–because-hes-already-making-3-million-every-year-2014-1

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  55. Yeah, Sabrina, your salary estimate for the top companies is a bit low and anon is probably talking about stats that include experienced programmers. Obviously I can’t get specific here but fresh out of school at Google, Facebook, etc…they are getting signing bonuses that rival their starting salaries, low 6 figure starting salaries, bonuses, and stock grants that vest over 4 years. They can afford the rent AND a very comfortable life style. My daughter shares a 2/1 with a roommate and it costs them $2050 each but their rent has not gone up in 3 years because of rent control.

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  56. In general the retirement savings of most Americans is non-existent. People just spend too much on useless shit that won’t make them any happier. The biggest mistake I’ve seen people make is assuming that they will always make as much money as they are now. They get a promotion and within a year or two they move to a bigger house and buy a better car. Then one day they are in their 50s, lose their job, and employers assume they are out of date. Now they’re moving backwards.

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  57. “move to a bigger house and buy a better car”

    realtor heal thyself.

    (I know it was a lot more than a year or two…)

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  58. Hah! When I bought my house my housing costs actually went down – until now with my higher property taxes. But I believe my rent would have continued to go up so I’m probably ahead.

    We have always lived well below our means.

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  59. “Yeah, Sabrina, your salary estimate for the top companies is a bit low and anon is probably talking about stats that include experienced programmers. Obviously I can’t get specific here but fresh out of school at Google, Facebook, etc…they are getting signing bonuses that rival their starting salaries, low 6 figure starting salaries, bonuses, and stock grants that vest over 4 years.”

    No it’s not.

    For years and years (even during the dot-com boom) silicon valley techies (i.e. engineers and the like) have written manifestos about how they will tell their children to NEVER become engineers because you are capped at a certain salary which really isn’t that high. There just is nowhere to go up. They start high and they kind of just stay there.

    Of course, stock options are a different matter but most of the guys writing the manifestos were working at the “old” companies like Intel and HP. That would now include Google – which is 15+ years old now- and others like Yahoo. Heck, even Facebook is now getting “old” and the riches you get from stock options just aren’t there now. They are all good companies but $125k in Silicon Valley just doesn’t go anywhere anymore and there’s no way to make more.

    Your daughter is renting. Not married. No kids. Isn’t concerned about buying a place evidently. Isn’t concerned about the crappy schools all over the Bay Area. So it’s fine in your 20s. But in a few years when the salary isn’t going up and they realize that $125k isn’t going to cut it there (because you cannot compete in the Bay Area on that salary) it will be the same old sob story that everyone has been telling for the last 20 years.

    But they all have to figure it out for themselves.

    I have lawyer friends making $200k who couldn’t cut it. They left. But most of them don’t have any upward mobility either. Once you go in-house you really don’t get salary increases either. You max out at a certain level. Ditto with engineers.

    They are in the nirvana stage again in SV anyway. When that ends they will lay off a ton of people like they did in 2000 and 2001. Good times.

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  60. Sabrina, much of what you say is true but they’re not starting these kids at $85k at the top companies. And it’s the “kids” like my daughter that are driving up the rents and hence the prices. That’s all I’m saying.

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  61. Just posted my December update and sales were pretty flat though inventory continues to plummet. I have no idea where Redfin is coming up with rising inventories. That’s black box big data for you.

    http://www.chicagonow.com/getting-real/2016/01/chicago-real-estate-market-update-december-treaded-water/

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  62. Gary, was Redfin looking at the metro area vs. your numbers which are for the city?

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  63. Gary concludes his blog post above stating:

    “Is this bizarre or what? Clearly it’s a seller’s market and you would expect prices to be skyrocketing – but they’re not except in special cases. That’s even more bizarre.”

    I totally disagree. I think your data affirms my prediction that prices (as measured by the Chicago Case-Shiller home price index (seasonally-adjusted)) will continue trending sideways or lower for the foreseeable future, for the next year or so (absent a surge in inflation).

    Imo, what is “bizarre” is your expectation that prices ought to be “skyrocketing,” when the data you’ve ably assembled strikes me as confirming the situation at hand: prices are moving sideways (“treading water”) or falling.

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  64. “Gary, was Redfin looking at the metro area vs. your numbers which are for the city?”

    They were clearly talking about the city.

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  65. “I think your data affirms my prediction that prices (as measured by the Chicago Case-Shiller home price index (seasonally-adjusted)) will continue trending sideways or lower for the foreseeable future, for the next year or so (absent a surge in inflation).”

    The CS has clearly been trending sideways but I find that peculiar given the data. What data suggests to you that prices would not go up? When supply is so low wouldn’t you think prices would go up?

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  66. “prices as measured by the Chicago Case-Shiller home price index”

    Condo index was up 4.66% Oct-14 to Oct-15. Likely more reflective of prices in the city than the SFH index is. Up 5.5%/year since the Apr-11 bottom, but down 4.1% from the Mar-15 post-peak, peak.

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  67. Nah. Off hand I’d say factors other than supply play a bigger role in determing house prices, at least in recent years.

    I can’t find the chart I’m looking for, so the link below will have to suffice to warrant my notion that (something like): house prices skyrocketed in 2010-2014, when the supply actually increased.

    http://www.advisorperspectives.com/dshort/updates/Home-Ownership-Rate

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  68. Gary, you write:

    “So here’s another bizarre factoid. Despite ever lower levels of inventory market times have not come down significantly, which makes absolutely no sense – unless there are just a ton of homes on the market that are overpriced right now.”

    I agree with that underlined part. So, I think you agree with me: nominal house prices will trend sideways or fall for the next 6 months.

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  69. I agree with you anon. I hear Sabrina’s point:

    “You cannot use Case Shiller to talk about Chicago. It encompasses too many counties. Also, it is only single family homes, not condos, which, in Chicago, is a huge part of the market.”

    http://cribchatter.com/?p=22876#comment-373302

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  70. But the shape of the curve for the Chicago Case-Shiller condo index looks just like the one for the house price index, so I don’t see what difference her distinction makes.

    https://research.stlouisfed.org/fred2/series/CHXRCSA

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  71. I’m so confused about today’s economy/real estate market – it seems as though all of the conventional wisdom is no longer applicable to today’s world. Whatever the reason, there are scary times ahead – not because people don’t have money – but bc there is no “safe” investment anymore – everything is a risk. Everyone’s guess is as good as everyone else (so don’t listen to schiller or any of the “real estate” gurus – they are expecting the future to be based on the past – but we see that is not happening in the real world)

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  72. The laws of supply and demand has not changed. But clearly some things have changed that affect home buyers demand: high college debt, delayed marriage, delayed family starting, less corporate relocation, unstable corporate employment, etc. Home seller have problems too: high loan-to-values, less movement to suburbs, later retirement, etc.

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