Market Conditions: Chicago Sales Down 13.1% in June Year Over Year
The June sales numbers are out from the Illinois Association of Realtors.
There wasn’t much change in the story from the previous months except that the year-over-year decline in sales was lower than we’ve seen the last few months. Median price continued to decline year-over-year.
In the city of Chicago, June total home sales (single-family and condominiums) were up 27.2 percent to 1,982 sales compared to May 2009 sales of 1,558; sales were down 13.1 percent from 2,282 homes sold in June 2008.
The city of Chicago median price increased 7.7 percent to $242,275 in June compared to $225,000 in May 2009; it was down 21.8 percent from $309,945 a year ago in June 2008.
“The trend in single-family home sales in the city reflects steady activity, but it is clear from the pricing we are seeing distressed property sales continuing to lead the market,” said David Hanna, president of the Chicago Association of REALTORS®. “Too many roadblocks are still the issue for the buyers who are ready and willing to take advantage of low rates and abundant inventory. Housing cannot lead the economic recovery with the current constraints on the entire lending process in place.”
Single family home sales are stronger than condo sales which isn’t surprising given the tighter lending requirements that have been put in place for the condominium market.
“Notably, the pendulum has swung from condo to single-family home sales which have rebounded to 2008 levels. In fact, in the Chicagoland PMSA single-family home sales this past June were up 0.7 percent from a year ago and up 21.3 percent in the city of Chicago,” said REALTOR® Pat Callan, president of the Illinois Association of REALTORS®.
“Buyers are beginning to realize that this combination of favorable home prices, historic low mortgage interest rates and the first-time homebuyer tax credit incentive may not be around next year.”
Callan noted that Illinois REALTORS® continue to urge first-time buyers to be under contract by the end of September to ensure a closing before the Dec. 1 tax credit deadline.
Illinois Homebuyers Take Advantage of Favorable Conditions in June; Sales Up 20.8 Percent from May, Median Price Up 6.6 Percent [Illinois Association of Realtors, Press Release, July 23, 2009]
Let’s hear G, Anon, Bob, and Sabrina talk about how housing is going to $0 per sq ft. LOL!
I remember someone stated that the realtors associations were going to start using month over month comparisons vs. year over year pretty soon. Looks like they hit that one right on the head.
Stevo why does the comparison methodology spouted off by the shill spokesperson seem to vary by month? ;D
Also Stevo, per the WSJ today, ‘Home Sales, All Over the Map’:
“Among metro areas that ‘still have a long road to recovery’ are Detroit, Phoenix, Las Vegas, Miami-Fort Lauderdale and Chicago.”
M/M comparisons for real estate are stupid because its such a seasonal activity to go house shopping… who (besides me and my wife) are crazy enough to go shopping for a home in the middle of a January Blizzard in Chicago?
Steve- Realtors are no different than any other salesmen on commission-> give consumers a false sense of hope so they will open their wallets. If realtor association were honest and said “the RE market is at least 2 years away from picking it’s face off the ground”, who would buy?!
“Let’s hear G, Anon, Bob, and Sabrina talk about how housing is going to $0 per sq ft. LOL!”
Let’s see Stevo make up some more statistics! You’ve misdirecting your ire, Stevo. Your reading comprehension is soo poor.
Oh, I think this makes sense. (anecdotal evidence alert)
I know some people who have money saved up, and who were priced out of the market in general the last few years. Now they are able to come in with low interest rates some decent savings (and LP aside), you can buy a still over priced tiny 450 – 600K condo in a building, or you can get the land, the yard, and the whole house for 500-700K (neighborhood dependant) it’s a no brainer
Are these people an abundant resource, no and I think you will continue to see a downward price trend for most parts of the city until incomes and rents and prices are aligned
If prices are going to ’99 does that mean volume is too? Are we there yet?
If you are waiting for M+A+T+I/rent to be 1, you will never find a place to buy, ever.
Existing home sales have been at 90’s volume for a while now; and we’re at 1950’s and 1960’s volume for new home sales/starts.
Capitulation will happen over the winter and spring will be the next major leg down.
Mr. Steve,
Why are you so mean? come on chillax, have a coke and a smile!
I know people hear preach doom and gloom, but its not all roses and unicorns either.
I never was really “believe what the numbers say” guy i go by what i see, (even though im an accountant), but i can say my hood is pretty doom and gloom on sales. last night on my jog i saw another house that got boarded up. but i it will turn around.
and yes people i said “chillax”, i am bring that phrase back so deal with it.
That’s right Sonies, because the acronym you’re referring to is PITI not MATI.
“Sonies on July 23rd, 2009 at 9:17 am
If you are waiting for M+A+T+I/rent to be 1, you will never find a place to buy, ever.
“
“. Now they are able to come in with low interest rates some decent savings (and LP aside), you can buy a still over priced tiny 450 – 600K condo in a building, or you can get the land, the yard, and the whole house for 500-700K (neighborhood dependant) it’s a no brainer”
Or, if you have the decent savings and think Portage Park is a-okay, you can get the land, the yard and the whole house for $250k (or less), where 3 years ago they were $400k+.
Which may be closer to reality, given that the mix of properties has shifted toward SFHs (generally more expensive) while the median price has plummeted.
and if piti/rent never equaled 1 or less than 1, then there would never be rental apartments. Investors couldn’t cash flow, tenants would buy instead of rent, and we’d all be homeowners. But since about 50% or so of Chicago rents….that cannot be true
“That’s right Sonies, because the acronym you’re referring to is PITI not MATI.”
Don’t be dense, HD; he was putting P+I together into M(ortgage) and adding in A(ssessments). PITI doesn’t include A, so it’s “inaccurate”* for condos.
*quotes b/c I think we all get the point.
Come on HD you have to be smarter than that, you know what I meant.
Plus most “investors” buy crapholes that need gut rehabs and do it themselves, or buy in garbage neighborhoods at a steep discount to get the or play Jr. Trump in a 3 flat and live in one of the units to get MATI+fixerupping/rent to be less than 1.
“and if piti/rent never equaled 1 or less than 1, then there would never be rental apartments. Investors couldn’t cash flow, tenants would buy instead of rent, and we’d all be homeowners. But since about 50% or so of Chicago rents….that cannot be true”
Are most rentals one-off units owned by a LL in a larger complex, or are most rentals in buildings which are all rental? When a LV 4+1 is marketed by a commercial broker, can you call them up and say “i’d like one, please” and have the response be anything other than laughter (or expletives)? Think about it.
You’re one of the biggest repeaters of some variation of “that fb will never be able to cover his PITI renting that condo”; why is that? Could it be that paying condo prices for rental apartments is (generally) a bad investment from a CASHFLOW perspective?
“If you are waiting for M+A+T+I/rent to be 1, you will never find a place to buy, ever.”
If this is true I suspect I’ll be a lifetime renter. But in reality its not true. In fact MATI should be less than 1, as ownership has less flexibility than renting (gasp!).
MATI only is above one for the same reason growth stocks trade at higher PE multiples: expectations of future capital appreciation.
Remove that and valuations come crashing down. Lately I’ve been a value investor anyway.
“Mr. Steve, Why are you so mean?”
If I was as long on real estate as him and my income depended on it, with the market being the way it is, I’d be mean as well. Not to say I’m sympathetic to ol’ Stevo, but I understand his animus and find it humorous actually. Internet barbs are funny: they reveal agitation and lack of restraint 😀
Anyone have a chart of sales volume going back 50 years?
MATI is above one typically because you are actually owning something by paying principal payments. After 30 years of owning vs. 30 years of renting you will at a minimum outright own your house (which is going to worth a heck of a lot more than $0) that you don’t have to pay for anymore.
Also bob, how’s your shorts workin out?
“Also bob, how’s your shorts workin out?”
The bleeding stopped awhile ago. Just sittin on ’em like a papa penguin. Gonna put some more $ in and go short on WFC as well pretty soon, read today in the journal WFC has over 50B in option ARM portfolio they inherited from Wachovia. Guess they didn’t get the memo that 86% of these loans are the minimum payment ones and almost half of those default. Their loan loss reserves are a lot lower than peers too..looks like Wells been lyin’ to me.
Calculated Risk new home sales chart going back to 1963
http://2.bp.blogspot.com/_pMscxxELHEg/SkIzHALpY3I/AAAAAAAAFo0/5w6_U_yPflk/s1600-h/NHSMay2009.jpg
“WFC has over 50B in option ARM portfolio they inherited from Wachovia”
Um, try $122 billion. Just from Wachovia, which was almost enitrely from its acquisition of World Savings.
Existing home sales back to 1984
http://1.bp.blogspot.com/_pMscxxELHEg/SkDlRIiK6vI/AAAAAAAAFnc/wA7a-SJCcyg/s1600-h/EHSMay2009.jpg
Your clerk rules 🙂
“Um, try $122 billion. Just from Wachovia, which was almost enitrely from its acquisition of World Savings.”
Well that is at odds with the WSJ today on page C10 which pegs it at 51.6B just from Wachovia. Overall their option ARM exposure is higher. In any case WFC is indeed toast IMO and the market just doesn’t know it yet.
“Well that is at odds with the WSJ today on page C10 which pegs it at 51.6B just from Wachovia”
I can find a ton of sources, from before the WFC acquistion, statnig clearly that Wachovia had $122b. For example: “Wachovia has $122 billion in option adjustable-rate mortgages.” From “Wachovia Suitors May Delay Bidding After Dimon’s Deal for WaMu”, bloomberg.com, Sept 27, 2009.
Now, might there only be $51.6B left that haven’t already been written off? Sure, but that changes the rest of the investment analysis, no?
The WSJ makes mistakes like any newspaper and then does corrections later. I’ve googled it and your 120B figure is widely reported in the press.
No way in heck they had 70B in writedowns in the interim and we know they can’t sell off these at anything close to what they’re holding them at. So just makes me more confident in this trade.
“Sept 27, 2009.”
An article from the future?
Warren Buffett on WFC:
“Then on top of that, they’re smart on the asset side. They stayed out of most of the big trouble areas. Now, even if you’re getting 20% down payments on houses, if the other guy did enough dumb things, the house prices can fall to where you get hurt some. But they were not out there doing option ARMs and all these crazy things. They’re going to have plenty of credit losses. But they will have, after a couple of quarters of getting Wachovia the way they want it, $40 billion of pre-provision income.
And they do not have all kinds of time bombs around. Wells will lose some money. There’s no question about that. And they’ll lose more than the normal amount of money. Now, if they were getting their money at a percentage point higher, that would be $10 billion of difference there. But they’ve got the secret to both growth, low-cost deposits and a lot of ancillary income coming in from their customer base.”
He admits Wachovia will lose them a lot of money in the coming quarters but they’ll earn plenty after that. I can’t help but think Buffett knows more about banking than all of us. His investment in GS has been right on.
“The WSJ makes mistakes like any newspaper and then does corrections later. I’ve googled it and your 120B figure is widely reported in the press.”
Finally tracked down a free version. The $51.2b is the part of the overall OARM portfolio WFC did not impair at acquisition–apparently they thought ~42% of Wachovia’s OARMs were going to perform as expected by Wachovia. Crazy.
“apparently they thought ~42% of Wachovia’s OARMs were going to perform as expected by Wachovia.”
Yeah they trusted the assumptions and analytical prowess of a failed financial institution. Then again so did Ken Lewis.
It seems there are no consequences for empire building even the wrong way. Welcome to the USSA, comrade!
Well all is about to change, the brainiacs down in Springfield released this gem today…
“Illinois to offer $6,000 loans for down payments on homes”
http://www.chicagotribune.com/business/chi-home-loans-090722-,0,2823666.story
Potential first-time home buyers are about to get a nudge from the state of Illinois.
The Illinois Housing Development Authority is set to announce later today that it will offer qualifying consumers short-term, interest-free loans of up to $6,000 to be used as down payments on home purchases.
In a bid to jump-start home sales, the Obama administration earlier this year announced that first-time home buyers would receive a federal tax credit of up to $8,000 next year if they closed on a home purchase by Dec. 1. The program, while stimulating interest, has been criticized because it did nothing to help buyers with initial down payment requirements.
Now the IHDA, following the lead of other states, has decided to offer advances to first-time buyers who finance their purchases through the state’s Home Start Loan Program.
Under the program, qualifying buyers will receive a zero-interest loan for up to 3.5 percent, or up to $6,000, of the purchase price to use for a down payment when they arrange a 30-year, fixed-rate, Federal Housing Administration-insured loan through one of the state’s participating lenders. A $300 application fee is required and the down payment loan must be repaid before June 30, otherwise interest will start accruing. :
The state is setting aside $50 million to help as many as 500 people buy homes and receive the advance loan under its Home Start program.
Income and purchase limits apply. To participate in the program in Cook, DuPage, Kane, Lake, McHenry and Will counties, households of three or more people can make no more than $86,135 and a single-family home can cost no more than $349,020. Veterans and active-duty military personnel don’t need to be first-time buyers to participate
“MATI is above one typically because you are actually owning something by paying principal payments. After 30 years of owning vs. 30 years of renting you will at a minimum outright own your house (which is going to worth a heck of a lot more than $0) that you don’t have to pay for anymore.”
Does this argument not have a rather circular feel to it? Values drop to levels where renters should buy but then the glut of non-owner occupied property looking for tenants drives rental values down thereby increasing MATI/rent? Makes it feel like a bit of a race to the bottom.
Nowhere is this better illustrated than in the Chicago condo market. I am very taken with how many units that are “For Sale @ 500k or for rent at (5% x 500k / 12). No investor can compete with that and hope to achieve a MATI/value anywhere near 1. As Sonies states above, slumlording or fixer-upping is the only way anyone is getting close to that number.
In reality renters make their short term decisions with much less thought than do buyers. When renter realise their power in the current market I fear any drop in the ratio will be offset by falling rental prices.
Also even Tony Yun of the National Realtors was on MSNBC saying that banks were holding shadow inventory and trying to drip feed it back on the market. Hmmm….large structural problem that is only revealed slower as the numbers stop adding up – deja vu anyone?
All the more reason to steer clear of properties under the threshold. Todays zero down buyers are tomorrow’s defaulters..can’t be good news for the sub 350k (really sub 410k) segment.
Eventually our government will run out of money to do crazy things like this–they are hoping they can kickstart the housing bubble again before they run out of creditworthiness.
Can’t save up 6k? NO problem! Just get a loan from the state of course! What happens if the ‘borrowers’ can’t pay back by June, well the state will charge them interest! What happens if they stop paying, period? (likely to happen on someone that can’t even save up a measley 6k) Oh the state loses more money on waste of space citizens that can’t stop buying junk food and shit from walmart for their kids.
When will these politicians get their heads out of their asses and just let the market take care of itself, while cutting out all the fat and shit programs run by overpaid slobs that steal right from our pockets every year.
“The state is setting aside $50 million to help as many as 500 people buy homes”
“buyers will receive a zero-interest loan for up to … $6,000”
Let’s see, 500 * 6000 = $3,000,000. Into whose pocket is the other $47 million going?
That’s government “efficiency” for ya… /barf
“That’s government “efficiency” for ya”
Or Tribune editorial control.
“Into whose pocket is the other $47 million going?”
12MM – City of Chicago
12MM – Cook County
18MM – Springfield
5MM – Illinois Tollway
“A $300 application fee is required and the down payment loan must be repaid before June 30, otherwise interest will start accruing.”
I am guessing they mean june30th of next year? Is the 300 fee refundable? otherwise isn’t it 5% on 6k?
The powers to be have decided (and correctly) that the crowds don’t care as long as dow is doing pole vaults. So we will see 12% unemployment and 12k on the dow. It won’t make any sense but thats how it will be….
$300? How can it be no money down if they gotta pay $300? That alone will drive people from the program. And then you mean they gotta wait to get the $8,000 tax credit? They don’t get it at the closing table?
“How can it be no money down if they gotta pay $300?”
$300 is for the $75 credit check plus $225 to pay somebody off.
“$300? How can it be no money down if they gotta pay $300? That alone will drive people from the program.”
Springfield will have to set up a third government agency to oversee that aspect and provide grants and/or loans to cover the application fee. Total cost to the state: at least $10MM.
“Springfield will have to set up a third government agency to oversee that aspect and provide grants and/or loans to cover the application fee. Total cost to the state: at least $10MM.”
LOL! Sad but true…