Biggest Story of 2014: Will Chicago Home Prices Continue to Rise?
According to Case Shiller, Chicago October home prices rose 10.9% year over year, the fastest increase in 25 years.
However, compared with September, Chicago prices actually declined slightly.
From the Chicago Tribune:
“The S&P/Case-Shiller home price index also showed though, that compared with September, home prices in October fell 0.5 percent, following a month-over-month gain of 0.3 percent from August to September. The monthly decline ended a seven-month run in which local home prices rose compared to the previous month.
Home prices in the Chicago area were on par in October with their February 2003 level before the housing crash and post-crash, in December 2009.
The news was also good for Chicago-area condominium prices, which rose 14.2 percent year-over-year in October but were flat compared with September. Area condo values were akin to their levels in late 2002 as well as in August 2010.”
But mortgage rates are now significantly higher than they were this time a year ago.
Will home prices continue to rise in 2014?
Or will it be a bifurcated market with the upper bracket still seeing increases, due to low inventory, but middle and lower middle class housing prices stalling out as consumers simply can’t absorb the higher rates?
Will more homeowners decide to try and cash in- easing the inventory crunch?
Chicago home prices jump by biggest margin since 1988 [Chicago Tribune, Mary Ellen Podmolik, December 31, 2013]
Gary: What are you seeing with sellers still taking losses on their sales? The price increases have alleviated some of it but in the condo market on the north side of the city it’s still really brutal. You can click on half the listings in Lakeview and the sellers are still taking pretty sizable losses from when they bought (like $20k to $50k losses.)
Won’t this keep inventory constrained again this spring- at least in the condo market?
If prices remain flat in 2014- who does that help? Buyers or sellers?
Depends on each persons situation. If you are a buyer at these price levels, but not ready to buy yet, then you have the benefit of time to make your purchase. Same goes for a seller.
I have to believe that more sellers will materialize this spring because some of the pain has been relieved. They’ve also had more time to pay down their mortgage and not having to write a check at closing (which is really economically irrelevant – but not cash flow irrelevant) eliminates a huge psychological barrier for them. I’m already fielding calls from these people and anyone who talked to me about selling since Thanksgiving I’ve simply told to wait until mid-January.
But the inventory situation tells the story and it’s still at record low levels on a months of supply basis. Therefore, more price increases ahead.
I also just commented on an earlier post that December sales will be up at least 6.5%. I’ll bet it’s going to be like 10%. I’ll have my final preliminary numbers on the 7th like I always do.
“I have to believe that more sellers will materialize this spring because some of the pain has been relieved. They’ve also had more time to pay down their mortgage and not having to write a check at closing (which is really economically irrelevant – but not cash flow irrelevant) eliminates a huge psychological barrier for them. I’m already fielding calls from these people and anyone who talked to me about selling since Thanksgiving I’ve simply told to wait until mid-January.”
Good! More inventory is healthy. It was just way too low last year. I’ll be interested to watch the new listings every day to see if that develops.
The 10-year treasury, by the way, is solidly above 3% now. Trading at 3.036% today. The bond market is pricing in the taper, obviously, even though it hasn’t even happened yet (first smaller purchase is later this month.)
lol “solidly”
not exactly… just wait and see what happens when we have our first correction in the stock market here within the first 2 months of the year…
“The 10-year treasury, by the way, is solidly above 3% now. Trading at 3.036% today.”
Does that mean we are “solidly below 3%” now at 2.978%
no chuck, we are really solidly below 3% now @ 2.995%
“If prices remain flat in 2014- who does that help? Buyers or sellers?”
Sellers can be desperate, buyers can wait most of the times.
Even if prices will stay the same, buyers will get more “free” stuff from sellers like extra appliances, for example.
“The 10-year treasury, by the way, is solidly above 3% now. Trading at 3.036% today. The bond market is pricing in the taper, obviously, even though it hasn’t even happened yet (first smaller purchase is later this month.)”
btw, 10 year now below where it was trading when taper announced….
btw, 10 year now below where it was trading when taper announced….
So, solidly above 3%, right?
“btw, 10 year now below where it was trading when taper announced….
So, solidly above 3%, right?”
Yes- the 10-year will be solidly above 3% this year. The taper is actually only beginning this month and will continue at least for the foreseeable future. December’s jobs report wasn’t enough to convince them to halt it given the other solid economic data.
If the 10 year goes the other way in 2014 that is only because the economy is as well. How does the housing market do in a crappy economy? Not well.
I am rooting for the ten year to be at 3.5% later this year. That means the US economy is humming along. That is what we want, housing be damned. If people can’t afford to buy a house with 6% mortgage rates, then housing prices are too high (and they will come down.)
“How does the housing market do in a crappy economy? Not well.”
In your opinion, how was the economy the last 2 years?
“In your opinion, how was the economy the last 2 years?”
Pretty good. We saw stable 2% growth. Employment finally picked up. The consumer took the reins. We haven’t been in a recession and some assets are at record highs which boosts confidence (especially on the upper end with stocks and art being at record highs.) Heck, even people in bonds have been doing well. Last year was the worst in like 15 years and still it only saw a decline of like 1% in the larger bond funds.
“In your opinion, how was the economy the last 2 years?”
This, of course, is mostly due to the Fed’s QE program which pushed in several trillion into the economy. Heck, even with the taper (and even if it continues on pace this year) the Fed will still pump in another $500 billion before they are done.
It’s incredible. Yet no one says a word about it.
I just saw this stat:
From 1980-2007 the Fed’s assets as a percentage of GDP remained between 6% and 7%. By the end of 2013, it was 24% of GDP.
Wow. We are SO screwed.
“If the 10 year goes the other way in 2014 that is only because the economy is as well. How does the housing market do in a crappy economy? Not well.”
Odd. The 10 year went “the other way” the last 2 years, and you said the economy was doing “pretty good”. I’m confused.
“This, of course, is mostly due to the Fed’s QE program which pushed in several trillion into the economy. ”
What do you mean by “into the economy”?
“Heck, even with the taper (and even if it continues on pace this year) the Fed will still pump in another $500 billion before they are done.”
Yet you expect something completely opposite to happen.