Market Conditions: Were August Sales Held Back By Low Inventory?

chicago-south-skyline-august-2015

How’d the Chicago market hold up in August?

Inventory remained extremely low statewide and in the city of  Chicago.

From the Illinois Association of Realtors:

The city of Chicago saw a 2.6 percent year-over-year home sales increase in August 2016 with 2,770 sales, up from 2,701 in August 2015. The median price of a home in the city of Chicago in August 2016 was $275,000, up 1.5 percent compared to August 2015 when it was $271,000.

August Sales since 2007:

  • August 2007: 2923 sales
  • August 2008: 2078 sales
  • August 2009: 1927 sales
  • August 2010: 1486 sales
  • August 2011: 1787 sales
  • August 2012: 2209 sales
  • August 2013: 2850 sales
  • August 2014: 2414 sales
  • August 2015: 2701 sales
  • August 2016: 2770 sales

“We saw a strong surge of late-summer buying in August which lifted sales to positive annual gains,” said Dan Wagner, president of the Chicago Association of REALTORS® and senior vice president for government relations at the Oakbrook-based Inland Real Estate Group of Companies, Inc. “The downside to this is that inventories in the city of Chicago saw a notable 14.7 percent decline, making August the fifth month in a row where we’ve seen double-digit percentage decreases in the number of homes for sale.”

Statewide, the average number of days on the market fell to 55 days from 64 days a year ago. Inventory also fell 14.8% to 64,915 homes versus 76,156 last August.

Mortgage rates remained cheaper than a year ago, with the 30-year fixed averaging 3.44%, down from 3.9% in August 2015.

“Sales recovered in August and prices continue to show positive annual gains,” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. “However, month-to-month sales’ forecasts suggest a downward trend for the next three months, driven in part by low inventories, the poor job recovery in Illinois and uncertainties about the presidential election.”

Do presidential elections really play a part in housing sales?

First I’ve ever heard of that excuse for a possible slowing market.

Market conditions continue to be favorable for sellers. Low mortgage rates, the stock market at record highs and a stable economy all seem to be underpinning this market.

Will the strong housing market continue into the fall market?

Illinois home sales, prices make a late-summer surge in August [Illinois Association of Realtors, Press Release, September 22, 2016]

30 Responses to “Market Conditions: Were August Sales Held Back By Low Inventory?”

  1. “Do presidential elections really play a part in housing sales?”

    No.

    Except for the 12 people who are actually serious about leaving the country, are currently renters, and were otherwise at the point in life where they might have been buyers this year.

    So, no.

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  2. September sales were hot too. I don’t see this train stopping, we’ll see a massive spike in sales when rate hikes begin, like the hysteria in summer 2013. Inventory is going to be terribly low but might see a fresh inventory next year after property tax hike anxiety sinks in.

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  3. The “stable economy” assertion seems at odds with the “poor job recovery” quote from the U-of-I guy . I think that the stable economy is selective.

    I think that because of the lingering instability, the whole market has gotten much smaller. Fewer sellers and fewer buyers equals a smaller market. The sales data doesn’t capture the rest of the market: sellers still in the market and buyers still in the market. The sales data also doesn’t show the market growth: new sellers entering the market and new buyers entering the market.

    There is a lot more holding back the market than low inventory.

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  4. “I think that the stable economy is selective.”

    The U of I expert is talking about the entire state. He’s likely referring to the budget mess which is putting a damper on the state’s economy.

    Chicago is lagging most other major cities which have unemployment rates under 5% (hell- look at the Ohio cities. Ohio is rocking right now.) Some of that also has to do with the budget fiasco and pension issues playing out.

    But there are 44 high rises being built in the city right now so I would say the “stable economy” is pretty evident (as are the 8,000 to 10,000 new luxury apartments being built all over the GreenZone.)

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  5. “Chicago is lagging most other major cities which have unemployment rates under 5% (hell- look at the Ohio cities. Ohio is rocking right now.)”

    Ok, let’s. Here’s the Aug-16 data for Chicago v Cleveland:

    Unemployment: CHI = 5.4%; CLE = 5.3%
    Total Employment, compared to pre-recession peak:

    CHI = Pre = 4,712,444 (Jul-07); Jul-16 = 4,780,182 = UP 1.43%
    CLE= Pre = 1,054,986 (Jul-07); Jul-16 = 1,002,167 = DOWN 5.0%

    Yeah, Cleveland is *totally* eating our lunch. If Cleveland’s labor force were the same size it was 9 years ago, they’d have a *huge* UE rate.

    Cincy does a point lower UE rate, but also with below-peak total employment. Toledo, Springfield/Canton, Akron/Dayton all are still well of peak employment, meaning that their low UE rates are driven by labor force dropouts.

    Columbus is doing really well, sure, but that’s only one of 5 significant employment markets.

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  6. Give me a break. I said Ohio cities.

    Cincinnati metro: 4.1
    Columbus metro (which is over 800,000 now): 3.9

    The unemployment rate for the state of Ohio as of August was 4.7.

    4.1 for Cincinnati!!!!!!!!!!

    What I said was completely true. They ARE crushing us- both statewide and in their major cities. Sorry if you don’t want to believe the stats. All this crap about the rust belt is just that: crap. Look at Michigan. The Grand Rapids/Kalamazoo corridor has unemployment at 3.4%. Grand Rapids is at 3.3%. Wow. Just amazing.

    I’m laughing my ass off at everyone who thinks things suck right now.

    And yeah- Illinois is lagging.

    State of Illinois unemployment? 5.5%.

    Even Michigan is better. Michigan unemployment = 4.5%.

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  7. Yes, give me a break indeed. Trying to act like Cleveland is in Ohio!

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  8. yikes Sabrina

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  9. “4.1 for Cincinnati!!!!!!!!!!”

    WITH FEWER JOBS THAN IN 2007!!!!! While Chicago has more.

    That means that the UE in Cincy is about a drop in the Labor Pool, NOT about “killing it”. In fact, it’s pretty much the opposite.

    Sorry if you want to spin the stats to show something that isn’t true.

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  10. “That means that the UE in Cincy is about a drop in the Labor Pool, NOT about “killing it”. In fact, it’s pretty much the opposite.”

    Nope. This is why the political candidates are spending little time there. They can’t go and talk about how “awful” it is because it’s not awful. Far from it. Virtually full employment.

    Ohio has gotten smart. The manufacturing jobs have been moving away for 30 years. They have diversified their economy. Youngstown has it the worst still and even still they have unemployment under 7%.

    Good for them and for all the other rust belt states. It’s simply not that bad out there. It’s far worse in Texas, Utah and parts of the Dakotas because of the energy job losses.

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  11. “It’s far worse in Texas, Utah and parts of the Dakotas”

    GTFOOH:

    Aug-16 UE rates:

    SD = 2.9
    ND = 3.1
    UT = 3.7
    TX = 4.7 (SAME AS OHIO)

    Even using the (facile) unemployment rate, rather than looking behind that single stat, the 4 places you cite as “far worse” are either the same as or MUCH better than “killing it” Ohio.

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  12. Unemployment rates are interesting, but anon (tfo) is exactly right, those Ohio cities are lagging badly. Chicago metro has never had more jobs in its existence, not true for the Ohio cities minus Columbus.

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  13. Ohio’s labor force is 218,000 people smaller than it was at its peak, Illinois’ labor is 125,000 smaller than at its peak. Illinois has 1,200,000 more people than Ohio, so Ohio ain’t doing that great.

    Also, Ohio still needs to create 124,000 jobs before it achieves it’s highest job number ever. Illinois only needs 46,000 to get there.

    Illinois is doing better clearly.

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  14. Can’t we all just agree that all housing has normative value determined by how we feel about the economy, at least until we have real wage growth (not any time soon amirite?)?

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  15. Michigan is even worse than Ohio. It is currently down over 360,000 jobs from its peak in 2000.

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  16. “all housing has normative value determined by how we feel about the economy”

    How some feel about the economy:

    https://www.redfin.com/IL/Chicago/6541-S-Sangamon-St-60621/home/13932711

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  17. “Ohio’s labor force is 218,000 people smaller than it was at its peak, Illinois’ labor is 125,000 smaller than at its peak. Illinois has 1,200,000 more people than Ohio, so Ohio ain’t doing that great.”

    It won’t EVER create peak jobs. The baby boomer generation has either left or is leaving. It’s the largest generation in history. I’m shocked that Ohio is just 218,000 smaller than its peak over a decade ago. I would have thought many more than those had left and gone south. The baby boomer generation is that large.

    These states are having troubles attracting millenials, also an enormous generation, so they’re left with Gen X which is WAY smaller than either of those two.

    You all are looking at the wrong things to determine how it is doing. When employers can’t find enough workers, even at job fairs, then, damn, they’re crushing it. And that’s what’s happening in many parts of both Ohio and Michigan. Sorry to burst your bubbles about how “awful” it is. It ain’t awful.

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  18. “It’s far worse in Texas, Utah and parts of the Dakotas”

    Excellent!

    So they’ve lost 250,000 jobs and they’re still crushing it? Awesome.

    What is everyone bitching about. It is AWESOME out there.

    You all are wrong, wrong, wrong about what is happening out there. And yes, Chicago is really lagging. We’re among the worst of all the major cities. Hell, according to anon(tfo) apparently Texas is going better than us so Houston must be wonderful.

    Never bet against the American jobs machine. Never. Ever.

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  19. “How some feel about the economy:”

    that streetview is just so sad :(

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  20. “Sorry to burst your bubbles about how “awful” it is.”

    Who said it was “awful”? Not me!

    You’re tilting at a strawman on top of a windmill.

    You sound like Trump!!

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  21. I actually posted this on Friday. September came in 0.9% below last year though IAR will report a 3.2% decline. Who knows what’s driving it but inventory (on average across all housing types and across the entire city) keeps hitting new lows though several north side community areas are seeing their SFH inventory skyrocket.

    Interestingly, if you look at the last 3 years in the first graph sales appear to have really stagnated.

    http://www.chicagonow.com/getting-real/2016/10/chicago-real-estate-market-update-september-another-weak-month/

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  22. “Who knows what’s driving it”

    Thanks for posting the link Gary.

    My theory is that the lack of inventory is keeping people in their rentals longer. After all, why would you trade in a luxury 2/2 rental for an older condo in the same neighborhood that you’re not in love with?

    On the single family home front- the prices, even with low mortgage rates, have just gotten too high. On the North Side, you cannot buy a single family home, even in Budlong Woods or Independence Park, for under $400,000 that is decent.

    And they are overbuilding the $1 million+ level.

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  23. I’m in the trenches and I can tell you why it’s plateaued: high prices and lack of qualified buyers at those prices. 10 years ago the boom was fueled by people buying multiple properties using no doc, no down payment NINJA loans.

    Today’s buyers are nowhere near as unqualified. Sure there are some issues – like the ability to use to moderately sized tax refund as a down payment for a $200,000 home; or buyers with OK credit and no savings using all their money to buy the home of their dreams; but in general, the lender will generally want to see a decent credit score ad stable income. They will also want to see you close on your first home before qualifying you for your second home, and I’ve seen at least a few contingent closings be delayed a few weeks because of mortgage qualification issues. Furthermore, the documentation required prove income is voluminous too – ask anyone who has tried to refinance, myself included. I had to upload literally hundreds of pages into the mortgage system to get approved.

    So we’ve basically reached the point where virtually everyone with a 680 credit score, a stable job and an $8,000 tax refund has already bought the home of their dreams. The next tranche of buyers, so to speak, are the deplorables buying multiple properties with spotty credit histories, unstable income and no savings, or, as in 2006, outright fraud; and if there’s anything we’ve learned from 2006, is that we’re another generation or two from letting that happen again.

    The other issue is high prices, and I can use myself as an example. Due to what is termed ‘major life events’, I now need a larger house and an extra bedroom. Except that larger homes with an extra bedroom in my community are literally two steps up the price ladder from what I paid for my house. The first step was the general increase in prices from my 2011 purchase until today. My house(including an extensive rehab of course) is worth nearly double today what I paid in 2011. But that’s every house in the area. The second step is that larger homes are just generally more expensive and have larger taxes. Sure, I could easily qualify for a loan for a 5 bedroom home in my area, but, the price is astronomically high, and with my other expenses, I’d be cutting it way to close every month. I’m sure I”m not the only person who thinks like this. It just ain’t worth paying that much of a premium for a larger house these days, so I’ll make do with what I havee.

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  24. “Due to what is termed ‘major life events’, I now need a larger house and an extra bedroom. ”

    lol I’m so sorry man

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  25. “several north side community areas are seeing their SFH inventory skyrocket”

    Breakdown between re-sale and new construction? My anecdata would point to most of it being overpriced new construction that’s seriously lingering on the market.

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  26. “a 5 bedroom home in my area,”

    Just move to the other Grove. This one’s pretty cheap:

    https://www.redfin.com/IL/Buffalo-Grove/875-Saxon-Pl-60089/home/13857366

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  27. “Breakdown between re-sale and new construction?”

    If I am to trust how the MLS breaks down new construction vs. resale then they are not materially different. Both are high and rising in Lake View.

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  28. “Just move to the other Grove. This one’s pretty cheap:”

    Ah, I spent a lot of time in that neighborhood as a teenager. Regardless, a house like that in BG shouldn’t cost only $309,000. On the north end of town a similar house has a $180,000 premium:

    https://www.redfin.com/IL/Buffalo-Grove/425-Ronnie-Dr-60089/home/14179573

    The issue is Wheeling which is literally right across the major street. That house is too close to Wheeling, which in the last 20 years has really turned into a dump of a suburb, right up there with Carpentersville and Round Lake Beach.

    I’ve had the misfortune in the last year of driving down west on Dundee Rd. from Milwaukee Ave. to roughly BG road and wow, what a shithole for a suburbs. Vacant store fronts, an empty lot where a K-Mart used to be, a series of latin grocery stores, another vacant lot where Wicks used to be prior to its bankruptcy. And that’s the problem with this town, you have to drive through shitty areas just to get to your house, even if it’s prestigious “north shore-ish” buffalo grove (if you can’t afford Wilmette, or northbrook, you move to buffalo grove).

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  29. HD commented about 875 Saxon Pl “…The issue is Wheeling which is literally right across the major street. That house is too close to Wheeling…” FWIW imo Hd misses the major value differentiation between the sfr on Saxon Pl & sfr on Ronnie Dr. Their respective locations put the first into Wheeling HS district & second into Stevenson HS district, which has much, much greater buyer demand. (That said, imo the ask for the SFR on Ronnie is at least $40K+ too high)

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  30. southbound, I actually thought this school was in the BG high school boundaries (214 changes boundaries all the time to diversify and equalize attendance) but upon closer examination it appears that yes, this is within the Wheeling attendance area. Under my previous analysis, BG High is not Stevenson but is an acceptable substitute so I didn’t mention it (and BG High is roughly 1/2 the size of Stevenson and to some is actually preferable); whereas Wheeling is clearly not even on par with BG High. So yes, the high school is clearly an issue too but I suppose attending wheeling high is implicit in being too close to Wheeling! Only if this house were a few blocks west into Arl. Hts it would be BG High or a few blocks south to attend Hersey!

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