Market Conditions: 46% of March Sales Were Distressed Sales
Crain’s reported on an uptick in Chicago home sales in March compared to both February 2009 and January 2009.
According to the Chicago Association of Realtors, 1,438 homes sold in Chicago in March, a 26% increase over February.
However, the number of sales which were “distressed” – meaning foreclosures or short sales – has been rising.
Distressed sales as a percentage of all sales in Chicago:
- 29% in January
- 37% in February
- 46% in March
The March numbers break down as follows:
- 497 detached homes sold, with 287 of those foreclosures or short sales (or about 57%)
- 637 condos sold, with 117 of those foreclosures or short sales (or about 18%)
- 312 multi-units sold, with 261 of those foreclosures or short sales (or about 84%)
The median price is also being affected by the distressed sales.
Still, sales remain well below the pace of a year ago and prices continue to fall, reflecting the growing number of distressed sellers.
For condos and townhouses, the biggest category sold in the city, the median price dropped to $289,500 in March, down 6% from $308,625 in January, according to the association.
The cause of the drop: lenders selling the homes piling up on their books. The median price on short sales and foreclosures was $88,000 in March, significantly lower than traditional sales, at $309,200.
First-time home buyers are accounting for much of the current sales, lenders say.
Katie Haller, 25, a consultant in Chicago for International Business Machines Corp., is one of those. A renter for the past three years in Lincoln Park and Lakeview, she’s been scouting for buying opportunities over the past two years. She decided to act last month after the price on a two-bedroom, two-bath condo in Wicker Park fell to $289,000 even though the unit was appraised at $330,000.
“I hadn’t seen that (kind of unit) in my range before,” she says. “It all fell into place.”
Lenders say purchases of this type are mainly what they are funding. Higher-priced homes aren’t moving, primarily because banks are demanding big down payments for so-called jumbo loans, those above the $417,000 limit set by giant mortgage buyers Fannie Mae and Freddie Mac.
“Our purchase applications have doubled since January,” says Hilde Betts, senior vice-president of consumer lending for Chicago-based Harris N.A., Chicago’s third-largest bank. “For us, that’s an indicator that clients are seeing a certain light at the end of the tunnel.”
See the Crain’s article for several excellent charts with all the data.
Home sales show spark [Crain’s Chicago Business, Steve Daniels, Apr 6, 2009]
“For us, that’s an indicator that clients are seeing a certain light at the end of the tunnel.”
oh yeah, that oncoming train…..
637 condos sold, with 117 of those foreclosures or short sales (or about 18%)
Well that makes me fell a lot better about my condo purchase. 84% of Multi units were short sales or REO’s? LOLZ sounds like everyone and their mother was attempting to be a junior Trump!
Vetro should account for another 100 units or so of that condos sold number. I checked the other day, and they’re pretty close to being sold out. While it probably doesn’t count as a foreclosure or a short sale, I’d still consider it a distressed sale, which raises the percentage to about 35% for condos.
Wait a second, what happened to those “seasonally adjusted” numbers that the NAR/CAR usually love? Why are they touting the month-to-month change without the adjustment?
Where are the historical numbers for context? How does the “26%” increase from Feb to Mar compare to prior years? Does it represent a bounce, or the same old splat?
Feb to Mar sales increased 26%. Yes, it is a very good time to be a short/REO seller. They are experiencing explosive growth in sales (+30% MTM Jan-Feb increased to +57% MTM Feb-Mar.)
Now, let’s pull out the short sales/foreclosures. That leaves an increase of only 8% for non-short sales/foreclosures.
Let’s take a look at the historical data. Keep in mind that these are total sales. It is safe to assume that short sales/foreclosures made up a much smaller % of total sales in prior years. This means something below the middle of the current year’s 8%-26% increase is comparable to the numbers below as representation of the strength of this year’s Feb-Mar “bounce” for anyone but short/REO sellers.
Feb-08 1,581
Mar-08 2,301 +46% YOY
Feb-07 1,940
Mar-07 2,692 +39% YOY
Feb-06 2,217
Mar-06 3,497 +58% YOY
Feb-05 2,620
Mar-05 3,342 +28% YOY
Feb-04 2,188
Mar-04 3,269 +49% YOY
Feb-03 1,896
Mar-03 819 +43% YOY
Now we see, typical MTM Feb-Mar sales increases indicate that a seasonally adjusted number for 2009 just might be negative, even with the inclusion of the short/REO sales.
“Our purchase applications have doubled since January,” says Hilde Betts, senior vice-president of consumer lending for Chicago-based Harris N.A., Chicago’s third-largest bank. “For us, that’s an indicator that clients are seeing a certain light at the end of the tunnel.”
“Confusing,” not “seeing.” Let me help: It is an oncoming train.
its a bifurcated market place, distressed sales in various conditions, mainly bad, many in undesirable neighborhoods, few and far between for more popular areas (picked up quick usually)
regular sales in better to fully renovated condition selling at reasonable but not extreme/desperate prices.
Many regular (poorly marketed/ poorly priced) listing languishing but not as long on the market place as in the SEPT-DEC period.
As foreclosures sales pick up and inventory drops, the ‘regular market’ will pick up with some confidence.
Drop in a good unemployment number here or there and it could begin the end of the downward phase of the slump.
A Tale of Two Markets..
Also I find it interesting the choice of the typical buyer the article featured. So far it is true that F500 companies haven’t had nearly the amount of layoffs as smaller businesses, however they are not immune and consulting is going to be one of the areas that gets hit hardest in this downturn.
Not to claim their example is imprudent but as someone who has seen many layoffs at many corporations in my 10+ years working than I can count on two hands I wouldn’t be buying a 300k place without a parental backstop in case of financial distress.
IBM just announced a round of layoffs and I think several other large Chicago based firms as well. It takes time from when the RIF announcement is made and when the cuts are made so I’d be in a holding pattern if I worked for a place like IBM that had already announced a RIF.
Sort of related, and a frequent topic here:
The CBO juste released the latest Household Income quintile (for 2006), which includes top 10%, top 5% and top 1%. Nationwide, in 2006, the minimum income for top 10% was $98,100–bascially the “magical” $100k that always gets discussed.
Now, Chicago-area incomes are significantly higher than national averages–the Federal locality adjustment is +24.47%–so there are significantly more than 10% of Chicago-area households with annual income of $100k+, out of a total MSA household count of about 3.4mm.
But… but… HD thinks everyone should be able to afford a Mercedes! Prices MUST drop until that happens! And 100k household incomes are super rare in the city!!!!
And oh yeah, the government is giving me 8k extra on this year’s tax return check… I didn’t even pay 8k in taxes! Thanks Barack!
Regarding the SFH data what a great preview for what the next two months CS Index will look like. With the median price of the foreclosures at 88k and them representing 57% of the market and with the CS Index only measuring SFH’s I predict the next two months the Chicagoland CS Index is going to tank faster than an oceanbound failed North Korean rocket launch.
Well, it’s about 400k households MSA-wide that have that income. And they are (probably) skewed to non-Chicago addresses, even adjusting for the over 70% of MSA residents who live outside the city. So, call it 300k outside Chicago, 100k in the city (rough, and based on estimations, but close enough for discussion).
Now, the City had 1,061,928 households in 2000 and 43.8% of households owned their home. So about 465,000 home owners in the City. So, somewhere around 20% of housing units should be priced in the $350-400k+ range.
I think there is little doubt that the “luxury” condo market was overbuilt–especially b/c so much of it isn’t anything close to luxury, even in the loosest sense. And there are more $1mm+ homes than can be reasonably absorbed. But the ratio of prices isn’t as absurd as some paint it to be, as long as the entry-level places (based on size or location) again become more entry-level priced.
SFH’s in the city are expensive in nice neighborhoods. Good luck getting a “deal” on one in a nice hood. For every million dollar home though there’s probably 25 selling for under 75k.
Bob:
I think you misread (or the author communicated poorly): the $88k relates to condos and townhouses, as it’s in the same paragraph. Sabrina added some paragraphing in the quote that doesn’t exist in the article.
as yes, here come the month to month numbers instead of YOY which was touted before. The sales increased from january to march, wow what a miracle. That has never happened before.
Okay that makes a lot more sense and thanks for the clarification. I could see 18% of the market of condos & THs having a median price of 88k and dropping the median by a small amount.
More specifically, sartre, short/foreclosure sales increased 103% from Jan-Mar while non-short/forclosure sales decreased 5%.
“So, somewhere around 20% of housing units should be priced in the $350-400k+ range.”
anon, there are currently 23,219 active att & det single family listings in the City of Chicago. $350K+ and $400K+ listings represent 34.5% and 27% of listings, respectively.
The breakdown is as follows:
under $100K 2,081 9.0%
$100,001-$200,000 5,451 23.5%
$200,001-$300,000 5,681 24.5%
$300,001-$350,000 1,991 8.6%
$350,001-$400,000 1,757 7.6%
$400,001-$500,000 1,917 8.3%
$500,001-$600,000 1,221 5.3%
$600,001-$700,000 771 3.3%
$700,001-$800,000 426 1.8%
$800,001–$1,000,000 567 2.4%
$1,000,000-$1,250,000 360 1.6%
$1,250,001-$1,500,000 283 1.2%
$1,500,001-$1,750,000 167 0.7%
$1,750,001-$2,000,000 160 0.7%
$2,000,001-$2,500,000 135 0.6%
$2,500,001-$3,000,000 104 0.4%
$3,000,001-$4,000,000 78 0.3%
$4,000,001-$5,000,000 31 0.1%
$5,000,001 and over 38 0.2%
My good friends from high school had a $100k+ household a few months ago but they both have been laid off in the last few months. Now they live off unemployment. But they live in Lake County – so I guess they don’t count.
hd,
This article hit the nail on the head with its target example of the firt time homebuyer: when you’re in your early or mid 20s you never think the layoffs will affect you personally, its always other people.
I think its similar to the invincibility that occurs with youth. There probably is some truth in that too in that in those years you typically aren’t earning nearly as much as someone with even five years of experience.
After having gone through an extended stretch of unemployment at one point a couple years ago I am no longer naieve to think that bad things don’t happen to even good/competent people. Without an eight month emergency fund no way would I be pulling the trigger on RE ownership–it just doesn’t make sense in this environment.
The massive cuts have barely started in Chicagoland, it will be a different story by the end of the year and certainly a year from now. I am in IT consulting too and you would be amazed how much more cautious with their money the older folks are vs. the younger folks who have never seen a downturn. Its not uncommon to know people with a 30k emergency fund sitting in a money market to hold them over in between gigs.
First time buyers and “investors” are the market right now. The first group is gullible, and the second is chasing the rental market down.
Say hello to next year’s foreclosures.
If you don’t pay $8k in federal taxes a year then you don’t make a 100k a year. $100k a year jobs are not as common as you think Sonies.
“#Sonies on April 7th, 2009 at 9:16 am
But… but… HD thinks everyone should be able to afford a Mercedes! Prices MUST drop until that happens! And 100k household incomes are super rare in the city!!!!
#
Sonies on April 7th, 2009 at 9:18 am
And oh yeah, the government is giving me 8k extra on this year’s tax return check… I didn’t even pay 8k in taxes! Thanks Barack!”
“If you don’t pay $8k in federal taxes a year then you don’t make a 100k a year. $100k a year jobs are not as common as you think Sonies.”
It was the previous year’s taxes (which was a very poor year for both of us), this year we’ll be over 100k easily.
So you go from being ‘poor’ last year to making $100k combined income this year….and the bank financed you to buy a condo in River North? Based on what? Projected future income? 60 days worth of paycheck stubs?
I’d hate to burst both of your bubbles, but the point is moot. The 8k credit starts phasing out at 75K.
HC if you claim the credit on 08 tax b4 income goes up you can get it all
Also we weren’t “poor” persay but we were under 100k but we also had a lot of deductions.
And when you get a mortgage you give them two months of paystubs, past two years W-2’s, assets/liabilities. all that crap. Rates are so low that you can easily afford to buy a house that is 3x gross income, especially if you don’t have a car.
Its not really going to matter anyway when both my wife and I will be making well over six figues each within the next 5-10 years. I’d say we have about a .001% chance of defaulting. Both of us are in very stable jobs and have ample savings if something happens.
HC the bubble has already burst, the $8k credit is merely trying to reinflate what has already popped.
$75k phaseout? You learn something new every day.
“I’d hate to burst both of your bubbles, but the point is moot. The 8k credit starts phasing out at 75K.”
For singles… Married couples it goes up to 150k (or something like that)
Ok, if you say so. Cross your fingers.
“Its not really going to matter anyway when both my wife and I will be making well over six figues each within the next 5-10 years.”
i was sent this from the chicagocondosonline site:
“According to figures released Monday by Midwest Real Estate Data (MRED), unit sales of Chicago condos are down 54% year to date, while total dollar volume is down 60%.
From January 1 through March 31, the number of units closed in the city total 1,349 in 2009 compared to 2,920 in 2008. The dollar volume for those units dropped to $462 million so far this year compared to $1.158 billion last year.
For condos closed year to date, the median sales price is $285,000. Average market time: 155 days. ”
Total dollar volume down 60%? no surprise but still… ouch.
Is the discussion about household or individual income of $100,000?
“Is the discussion about household or individual income of $100,000?”
It wavers back and forth depending on who’s trying to make the point, but since it’s a discussion of what’s “affordable” for housing, it should be (consistently) household income.
“If you don’t pay $8k in federal taxes a year then you don’t make a 100k a year.”
Naviety here. Don’t confuse income with taxable income.
The volume/sales pattern for condos in downtown Chicago seems surprisingly similar to the volume/sales pattern of real estate in Stockton, CA.
“Naivety” n-a-i-v-e-t-y
The ‘you’ in my comment was directed towards sonies and he admitted I was correct. Being familiar with his posts over the last few months I felt comfortable in suggesting that he didn’t make $100k if he didn’t pay $8k in taxes, given that he is a single guy with no kids, a w2 job and no mortgage deductions, and presumably, no other real estate and probably took the standard deduction last year. Had I said:
“If one doesn’t pay $8k in federal taxes a year then ones doesn’t make a 100k a year.”
Then maybe you’d have a point. But of course you don’t.
“MADFLY on April 7th, 2009 at 4:13 pm
“If you don’t pay $8k in federal taxes a year then you don’t make a 100k a year.”
Naviety here. Don’t confuse income with taxable income.”
I agree that the housing market at the lower end is being propped up by Obama’s initiative for this year. My question is, what will happen next year?
homedelete may seem too conservative for most, but purchasing a home in this climate using the 39-33% all debt figure is risky. 20-25% of income is a much better cushion, unless one has a back-up such as wealthy and helpful relatives or a large reserve fund. Because real estate is rather illiquid, the purchase price should support being able to support the cash flow of renting if necessary.
As for overextended babyboomers, they are really in a difficult situation. Their large houses will be difficult to sell, have lost a lot of value (due to the large purchase price), and will have a limited market for selling.