IAR: Chicago-Area Home Sales Slide Another 28% in June
The Illinois Association of Realtors is out with the June sales numbers for the 9-county Chicagoland area and the full state. There is no City of Chicago specific data.
From the Illinois Association of Realtors:
Total home sales (which include single-family and condominiums) were up 3.6 percent in June 2008 to 11,643 sales compared to May 2008 sales of 11,243.
Year-over-year sales were down 27.0 percent from June 2007 totals of 15,945.
The Illinois median price in June reached $200,000, down 6.1 percent from $213,000 in June 2007. The median is a typical market price where half the homes sold for more, half sold for less.
In the Chicagoland area, year-over-year sales were down 27.9% to 7,656 sales from 10,612 home sales in June 2007. From May 2008 to June 2008, sales were up 10.5%.
In Cook County, sales declined 28.6% and the median price fell 0.9% to $274,500.
“Record oil prices continue to buffet the U.S. economy. Continued uncertainty in the financial sector is raising concerns about credit availability and the impact that this might have on both housing and industrial construction over the next 12 months,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois.
“Forecasts for the next three months (July, August and September) suggest continuing declines in home sales compared to the same months last year. Price declines comparing year-to-year will be more moderate in Chicago at around 3.5 percent and 5.5 percent in the state.”
The realtor groups are emphasizing the month-over-month increase in sales. Is this legitimate or a red herring?
Red Herring.
Aren’t June sales almost always higher than May sales?
The overall trend is straight down and doesn’t look to reverse anytime soon. Remember, we have another wave of mortgage resets coming, about $500 Billion worth of Alt-A. This next batch is said to include a really high number of pay-option ARM loans, where the borrower is paying the minimum payment just barely. Credit is going to be even harder to get than it is now.
The NAR can put a positive spin on anything. I just got my weekly email from them yesterday and they are once again promoting their pamphlet ‘It Is a Great Time to Buy’. As they put it “sold in packages of 100, is an informative resource for REALTORS to share with consumers and offers information on the market,interest rates, seller inventory and more.” They’ve been saying it’s a great time to buy for a couple of years now. They even have a whole Web site devoted to providing so called facts about homeownership. I find it so self-serving that I regularly debunk their points:
http://blog.lucidrealty.com/2008/07/17/lying-with-statistics-part-ii/
On the other hand you can’t realistically time the market. Who knows when it is going to turn around. And even though prices have come down have you seen what’s going on with mortgage rates lately? I don’t see it turning around any time soon. Sellers still haven’t capitulated.
Laura:
That’s the funny thing about these stats- they are given in a complete vacuum. None of the journalists are writing about the actual numbers- the articles I saw simply regurgitated the IAR press release.
There was no independent reporting about what happened in May and June 2007 (did sales rise from month to month last year? Does it happen EVERY year?)
It was just the IAR spinning the numbers and the newspapers didn’t delve any further.
What were sales like in 2006? 2005? 2000?
As more and more banks either go under or experience catastrophic losses to the extent that they will reign in their lending, I don’t see a reversal of this trend any time soon.
Also the government measures to shore up Fannie and Freddie _allow_ them to buy conforming loans up to a 630k limit, however this is no different than a similar government rule this February which did the same thing. Fannie and Freddie did not alter their business practices to buy these quasi-jumbo loans.
Its like saying you’ve been given permission to buy something worthless.
Sure, sales usually go up from May to June… but I believe in some parts of the country they did not, or only barely did (wasn’t that reported just a couple of days ago by the NAR?) If so, then yes, the fact that in Chicago-land there *was* the usual Spring-selling-season bounce, is at least not bad news. And in this market, not-bad-news is good news.
Of course, I’ll believe it more when someone other than the Illinois lobbying arm for real estate agents confirms the numbers…
“The realtor groups are emphasizing the month-over-month increase in sales. Is this legitimate or a red herring?”
In good times and bad sales should be going up in the summer months as compared to the spring months. YoY is the real indicator. If the median prices had increased YoY but drop MoM they’d be using YoY #’s as their positive indicator for that set of #’s. It’s spin.
“On the other hand you can’t realistically time the market. Who knows when it is going to turn around.”
Gary,
You’re correct you can’t time the market. Look at the specuvestors who are left holding condo units they can’t unload because the held on to long. However, since RE isn’t like the stock market when the market “turns around” we won’t just wake up one morning and see that home prices went up 10%. You’ll have time to read the tea leaves.
“And even though prices have come down have you seen what’s going on with mortgage rates lately?”
As I’ve said before on this site I’d rather buy at a lower price and a higher rate than and higher price and a lower rate. You can renegotiate your rate you can’t renegotiate your purchase price. Plus, your interest is tax deductable.
Agree with Ken.
I have to agree with Ken also. Only problem is that you could end up waiting years for rates to come down. I seem to remember many years with high mortgage rates.
BTW, since there seemed to be some interest in a historical perspective on the Chicago area home sales numbers I dug up 2 years worth. I posted it here:
http://blog.lucidrealty.com/iar-home-sales/
Hope that helps. Things are definitely not getting better but I keep hearing that sales are more like what they were back in 2002. Don’t know if that’s true.
I don’t know when the market will bottom or how far it will fall, but I am absolutely certain the bottom is not here yet. Why? One work: inventory.
Gary,
You are correct. However if you treat your mortgage as payment based like most people do, it shouldn’t matter whether rates stay high for 15-20 years. So long as the increase in the after tax mortgage interest is offset by declining property values in a dollar for dollar change of the payment composition..
Pete,
I thjink we’ll have an idea that we’ve bottomed out when inventory starts to decline on YoY levels and the foreclosure tidalwave starts to reverse.
Closed Sales
Detached & Attached Single Family
City of Chicago
Year—1st Q—May —June —2nd Q —1st H
1997—3,126—1,688—1,817 — 5,163 — 8,289
1998 — 3,600 — 1,968 — 2,214 — 6,193 — 9,793
1999 — 4,179 — 2,108 — 2,435 — 6,620 — 10,799
2000 — 4,440 — 2,560 — 2,513 — 7,258 — 11,698
2001 — 4,324 — 2,348 — 2,451 — 6,967 — 11,291
2002 — 5,419 — 2,654 — 2,590 — 7,993 — 13,412
2003 — 5,666 — 2,762 — 2,891 — 8,340 — 14,006
2004 — 6,403 — 3,249 — 3,752 — 10,176 — 16,579
2005 — 7,307 — 3,589 — 3,850 — 10,809 — 18,116
2006 — 6,922 — 3,592 — 3,557 — 10,120 — 17,042
2007 — 5,994 — 3,132 — 3,153 — 9,032 — 15,026
2008 — 4,801 — 2,178 — 2,297 — 6,420 — 11,221
YOY — -20% — -30% — -27% — -29% — -25%
YOY-2005 — -34% — -39% — -40% — -41% — -38%
Gary Lucido on July 25th, 2008 at 6:39 am
The NAR can put a positive spin on anything. I just got my weekly email from them yesterday and they are once again promoting their pamphlet ‘It Is a Great Time to Buy’.
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Tell that to the Greedy Sellers that refuse to negotiate.
we won’t just wake up one morning and see that home prices went up 10%. You’ll have time to read the tea leaves.
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The tea leaves are telling me that as credit tightens, higher down payments are on the way. G/L selling your 2 bed 2 bath condo with no parking when the buyer needs $60,000+ before closing costs…..
SITC,
Unfortunately idiots can still buy with only 10% down. This is a whole lot better than 5 or 0%, but its still not close to 20%.
I don’t think valuations will return to sanity until all of the gimmicks that fed the RE bubble are no longer present, including loans less than 20% down.
Heck it’s still possible to borrow 97% and finance the closing costs!