Market Conditions: Chicago August Sales Down 7.2% YOY; Median Price Declines 22.9% YOY
The August sales and price statistics are out from the Illinois Association of Realtors and show further declines in the city in both sales and median price. Chicago appears to be struggling to increase sales more than the total Chicagoland area.
The first-time home buyer credit boosted sales for the month. The IAR also states that foreclosures and short sales continue to put downward pressure on prices.
From the Illinois Association of Realtors:
In the city of Chicago, August total home sales (single-family and condominiums) totaled 1,928, down 7.2 percent from 2,078 homes sold in August 2008. The city of Chicago median price in August 2009 was $229,476, down 22.9 percent from $297,500 a year ago in August 2008.
“Homebuyers continue to be active, and the absorption of distressed inventory is the reason the number of units sold in August 2009 is nearly the same as this time last year. Still, the housing market in the Chicagoland area is far from robust, as most home sellers will attest. We strongly advocate for an extension and expansion of the American Recovery and Reinvestment Act’s first-time homebuyer tax credit program, broadened to include all buyers and favoring no taxpayer over another,” said David Hanna, president of the Chicago Association of REALTORS®.
“Here in Chicago the move-up buyer and those with higher incomes are facing a number of additional financial and procedural obstacles that must be addressed.”
Sales were actually higher by 1.3% year over year in the 9-county Chicagoland area as 7,009 homes sold in August compared to 6,917 in August of 2008.
“The Internal Revenue Service recently reported the $8,000 first-time homebuyer tax credit has provided a tax benefit to more than 1.4 million people to date. REALTORS® are urging Congress to extend the tax credit beyond the fast-approaching deadline of December 1 so more people can take advantage of it,” said Onorato, broker-owner of Onorato Real Estate in Coal City. “Also just now gaining awareness is the Illinois Home Start program, which offers eligible first-time buyers a short-term no-interest loan of up to $6,000 for the down payment in anticipation of the tax credit. With more time, these programs can really help sidelined homebuyers.”
According to Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois: “The size of the unsold housing inventory continues to make this a buyers’ market with an approximate value of nine months for Illinois and almost 11 months for Chicago at current sales rates. Absent an uptick in sales, it is unlikely that prices will recover much before the middle of 2010.”
August Illinois Home Sales Strong at the Entry Level, Statewide Median Price at $165,000 [Press Release, Illinois Association of Realtors, Sep 24, 2009]
“Here in Chicago the move-up buyer and those with higher incomes are facing a number of additional financial and procedural obstacles that must be addressed.”
Perhaps the ‘move up’ buyer could benefit from an extension of the credit, but for those with higher incomes to be allowed additional benefits is just not right in these economic times. While I am not advocating to restrict their rights to continue to prosper during this meltdown, I do not think they deserve any special rights or benefits.
A first time home buyer is struggling and the odds are stacked in their favor and yet those with the financial means to have two, three or more high dollar residences are expecting some sort of assistance to retain their wealth? Did we revert back to the rule of GWB which got us so deep into this mess to begin with?
“…broadened to include all buyers and favoring no taxpayer over another,” ABSURD
We strongly urge Congress to increase the tax credit to $100,000 and the Fed to increase their purchases of MBS. We feel that mortgage rates of 0% combined with a $100,000 tax credit will have a meaningful impact on housing – Chicago Association of REALTORS®.
REALTORS®..What a joke.
I like to focus on the broader PMSA. People move freely from the suburbs to the city and vice versa and it’s one economy. This makes two months in a row that sales have been up over last year – second graph here: http://blog.lucidrealty.com/chicago_real_estate_statistics/
Of course, as we’ve discussed before, this could just be a demand shift caused by our ever benevolent government throwing money at houses (which I and my clients gladly accept).
Volume only down 7.2% YOY isn’t that bad, the 22% price decline… yeowch!
Well, as I’ve said many times, that median price stuff is worthless. Totally mix driven.
That’s true, and I personally don’t care (since I’m in the “green zone”) if some dump in englewood got forclosed on and is now worth 15% of what some moron paid for it and now a slumlord is section 8ing the property, which does skew prices quite a bit.
Off topic, but I’m wondering if there’s a way to see prior listing prices for properties taken off and then put back on the market? E.g., redfin shows me changes in the current, but not prior, listing. Looking at the house at 3857 N Oakley, just under $1.2MM at the moment.
DZ,
Yes, this information is available through the MLS. Ask your Realtor for it.
Damn, just bought a 775 sq foot 1bed 1 bath in River North for 445k (not including parking). I hope I did not pay too much.
“Damn, just bought a 775 sq foot 1bed 1 bath in River North for 445k (not including parking). I hope I did not pay too much.”
What building?
“Damn, just bought a 775 sq foot 1bed 1 bath in River North for 445k (not including parking). I hope I did not pay too much.”
You did… unless that building is EXTREMELY high end.
“Looking at the house at 3857 N Oakley, just under $1.2MM at the moment.”
It’s been headed straight down. I don’t remember the exact original list, but it was around $1.45 or $1.5 in the spring. He’s been reducing it regularly since then, but de-lists and re-lists it (almost) every time, so it’s hard(er) to track.
It’s a nice looking place and in the ballpark for what SFHs have traded for in Bell recently (v. few this year, tho). They started work on it last summer and did not appear to be doing a slap-dash job–but that’s always hard to tell for sure unless you watch every day, which I did not.
The question is: is the rehab (including the all-brick extension) + the Oakley location worth $600k+? Because there are two brick two-flats on Claremont for sale for $550k.
The median drop is directly attributable to the $8,000 tax credit combined with the FHA rules allowing it to be used as part of the down payment. This allows people to buy places under about $225,000 with none of their own money down so of course sales have increased tremendously in that price bracket. This definitely skews the median price, never mind that in the long term this is just repeating the same stuff that got us into the mess in the first place.
PS – Lincoln Park will be fine.
Here’s what I see for 3857 N Oakley:
listed 4/12/07 $600,000 closed 7/7/2008 $600,000
listed 3/2/09 $1,299,000 cancelled 4/15/2009
listed 4/15/09 $1,269,000 cancelled 5/29/2009
listed 5/29/09 $1,249,000 reduced to $1,245,000 cancelled 7/15/09
listed 7/15/2009 $1,199,000 reduced to $1,189,000 active
PS – LP, a fine place to continue losing money?
sarcasm?
>Damn, just bought a 775 sq foot 1bed 1 bath in River North for 445k (not including parking). I hope I did not pay too much.
Median price is down because of the lack of activity in the higher end and increased activity on the lower end.
Not really sure the tax credit is that big of a factor. Prices are lower and people smell blood in the water. The tax credit is just an added bonus. No one buys (at least not anyone who is remotely qualified to buy a home in this market)over an $8k credit.
You either were going to buy or you weren’t. The credit might have pushed a few people to buy prior to the deadline, but certainly not the sole reason they are buying a place. Those same people would have still bought, credit or not.
“You either were going to buy or you weren’t. The credit might have pushed a few people to buy prior to the deadline, but certainly not the sole reason they are buying a place. Those same people would have still bought, credit or not.”
Probably true (99+%) in the city, but do you think that’s also true in the exurbs?
I think once the credit is gone you will see more than an $8,000 drop in price. It’s probably better to just wait till the program ends to buy and you’ll get a better deal overall.
“I think once the credit is gone you will see more than an $8,000 drop in price. It’s probably better to just wait till the program ends to buy and you’ll get a better deal overall.”
Well no, because the credit doesn’t apply to all homebuyers, just first timers.
And well, typically prices fall in Winter anyway so yeah you are right there.
Given current mortgage lending guidelines, very few people are buying who aren’t qualified. The credit isn’t applied immediately and lenders don’t consider it an “asset” or money in your checking account, so you are going to still have to qualify without it.
I have a few clients looking to close prior to the Nov. 30th deadline so they can get the credit, but these folks would have bought anyway. I have quite a few clients who put off buying until early next year too even though they are going to lose the credit as they think prices are still too high or they simply can’t find what they want.
I just don’t think the credit is a huge factor in the decision to buy or not to buy for the vast majority of people. Even the NAR said that only about 350k people bought nationwide because of the credit… costing US tax payers a whopping $43k per additional home sale. In other words, the credit hasn’t done shit to help the housing market.
I was referring to the lower priced homes/condos that would more likely be bought by a first-time buyer. If the credit is not renewed, it could get ugly this winter with another 10% drop from where we are at, easily, but the data isn’t apples to apples like Case Schiiler attempts to compare.
I would like to see some of the Case Schiller data on the upper end of the market for homes that would have sold in the $600K – $1.1M range in 2006 or so, and what they would be selling for today. The lack of transactions makes me think the drop in price would be much more if more of the owners had to sell. That’s why I think the true pain will occur in 2010 for the more expensive homes and condos that would more likely need to be financed by jumbo loans.
The good thing for 2010 will be that the price drops on a percentage basis will be lower most likely, because of the large drops the previous year. We should be comparing 2006 or 2007 to 2009, and see how that shakes out.
Where are all the people going to go that can continue to pay their mortgage, but are 25-35% underwater? They won’t be able to move for a long time, as it will take years for prices to recover.
To get more transactions in the “move-up” market, sellers should lower prices, not get more government intervention.
The credit is a joke. God forbid you have a decent job and make more than 75K…
“To get more transactions in the “move-up” market, sellers should lower prices, not get more government intervention.”
Which sellers? If both do, then the mover-uppers might not have the cash available for even the reduced DP required for the move-up home, after they pay off the shortfall at their sale closing.
The sellers of homes in the move-up market, which I would estimate to be in the $475K-950K range need to come to grips with reality and cut their losses. Their credit scores will recover faster than the value of their home if they bought in 2006 or 2007 with low money down. Lots better than having to bring $50-75K to the table at closing…
The market is the lower end, I’ve seen stats around showing that the move-up market is damn near comatose. Which makes sense too. There are increasing fewer and fewer sustainably high income ($200k+) households to pay mortgages on $600k+ homes. Especially now their their equity has been decimated they have smaller downpayments. The lower end of the market is the market, that’s what the market was pre-bubble before $1,000,000 SFH homes became the norm. Now that we’re reverting back, it seems so odd and weird, but in reality, this is normal mix of housing prices that should be selling. Russ even admits it’s not the credit pushing sales, it’s qualified buyers and what they can afford driving the market.
“russ on September 24th, 2009 at 10:57 am
Median price is down because of the lack of activity in the higher end and increased activity on the lower end.”
Without a doubt there are first time buyers out there making less than 75/150K who are looking to buy now while they can take advantage of the government giveaway – who wouldn’t? They would have eventually bought anyway but this is shifting demand forward. I think that’s what’s pulling sales up the last 2 months. But God help us once the window closes – mid to late October in order to close on time. There’s going to be a vacuum from all that shifted demand. As usual, when the government fights the market the market always wins.
“I would like to see some of the Case Schiller data on the upper end of the market for homes that would have sold in the $600K – $1.1M range in 2006 or so, and what they would be selling for today.”
Although you asked for C/S data, I will provide a sample of the upper level homes I bought & sold throughout Fl and NY. There are 10 places that were priced above the highest price listed here which I am not including… am happy to report that all of those in that group did sell and enabled me to make a good profit.
Bought Invested Sold
2004 755,000 225,000 1,589,000 2006 + 609,000
2005 867,000 310,000 1,795,000 2007 + 618,000
2005 769,000 245,000 1,395,000 2006 + 381,000
2006 995,000 334,000 1,750,000 2006 + 421,000
2006 1,490,000 450,000 2,499,000 2007 + 559,000
2007 1,150,000 325,000 1,800,000 2008 + 325,000
2007 990,000 300,500 1,575,000 2008 + 284,500
2007 795,000 276,000 1,235,000 2008 + 164,000
2008 1,750,000 450,000 2,399,000 2008 + 199,000
2008 2.100,000 395,000 2,699,999 2008 + 204,999
2008 950,000 335,000 1,559,000 2009 + 274,000
2008 1,497,000 245,000 1,897,000 2009 + 155,000
2009 769,000 300,000 1,259,000 2009 + 190,000
2009 859,000 195,500 1,299,000 2009 + 144,500
You see a steady drop in profit for homes at this price range, I was lucky to get the price I did for homes in 2008 & 09…the absolute lowest I would go.
When I say invested, this is not counting my labor costs. When you consider I had between 3 – 6 people on my payroll throughout that period…well, at times I thought I was just doing this as a hobby.
Now mind you, this list are only the most expensive units I turned over in this time period, excluding the 10 which I mentioned above. On the sale of just one of those 10 ultra high dollar places, I made nearly the equivalent profit of all of the ones listed here. I still am retaining 8 at the above level, purchased in 2006 – present, which have yet to sell. The longest one being on market for 18 months… all others are renting at very minimal rental rates. Had I taken mortgages out on any of these units that are rentals now, I would not be able to meet the monthly payments collected from the rent I charge.
So yes, that higher end market is stale right now and I believe it will take at the very minimum, 5 years for it to straighten itself out.
I did purchase and sell around 30 or so other places between $300 and $500k since ’05 which I made a minimum of $70,000 profit on. So the lower priced homes have been my saving grace. At no time since 1995 have I sold a home which I lost $$$ on. I just refuse to do that.
Personall for the next two years or so I will not be investing in homes above a million unless they are homes that I know I will enjoy myself or plan on holding onto them for years…Hello 6505 & 06 in Aqua!!
Thanks, G! Not sure they’d take a low offer yet.
i’m a 1st time buyers that is looking in the 400-500k range. I can’t find any properties that are farely valued. I continuously speak to the seller’s who are pricing their property based on what they bought it for in 05 or 06 and their response is “we can’t lose money on our house and price it lower.” We’re going to probably wait till the 8k expires, just because we’re going to overspend by 40k to save 8k.
in regards to the move upper, an educated lady in my office owns a townhouse but wants to move up to a house. Her rationale for not moving is that she can’t take a “75K hit on her townhouse.” She doesn’t seem to grasp that she’ll probably pay 75k+ less for her future house, so at the minimum it’s a wash.
Too many sellers are stuck in the mindset that I paid X and need to get X back. No matter that they’re paying 98% interest every month and property taxes and taking a hit would actually probably save them $.
“Thanks, G! Not sure they’d take a low offer yet.”
DZ–Word is he turned down a “low” offer in the spring.
funnier thing is they won’t accept that they have ALREADY taken the damn hit!
“funnier thing is they won’t accept that they have ALREADY taken the damn hit!”
Funniest thing is that, with the school year having started, DZ might be the only genuine prospect until next summer–maybe $65k in carrying costs later.
Mayday, but its not a wash. That 75k the townhome owner loses is gone. That’s real money, not paper equity. The 75k she ‘saved’ on the new isn’t really saving anything. She only ‘saving’ money in the sense that she’s paying less than the overinflated 2006 price. At the end of the transaction she’s still 75k poorer even though she has a bigger home. The concept of the move-up home relied on ever appreciating equity and higher incomes, both of which have disappeared for a while. people will start buying homes to live in them, not to flip them to a buyer lower down in the ponzi scheme.
“It’s a nice looking place and in the ballpark for what SFHs have traded for in Bell recently (v. few this year, tho). They started work on it last summer and did not appear to be doing a slap-dash job–but that’s always hard to tell for sure unless you watch every day, which I did not.
The question is: is the rehab (including the all-brick extension) + the Oakley location worth $600k+? Because there are two brick two-flats on Claremont for sale for $550k.”
“Word is he turned down a “low” offer in the spring.”
Thanks for the info, anon (tfo). I missed your comments earlier. Very helpful. Any thoughts on how much a renovation like that cost?
I thought things were generally nicely done. Not everything to our tastes but not bad. I wonder if he is running out of money as the back yard seemed a bit spartan. The grass area is also tiny given the large deck–probably not what I would have chosen. And he hasn’t put in closets and is offering a credit instead (is that common?), and the basement carpeting did not seem as nice as it could have been.
DZ: “Thanks for the info, anon (tfo). I missed your comments earlier. Very helpful. Any thoughts on how much a renovation like that cost?”
Not certain, but would say as a near certainty it was under $100 psf, so not more than, what, $375K?, and most likely a fair amount less than that. I wasn’t peeking in the windows during the demo, so I don’t know it it was stripped to the bricks or not.
“I thought things were generally nicely done. Not everything to our tastes but not bad. I wonder if he is running out of money as the back yard seemed a bit spartan. The grass area is also tiny given the large deck–probably not what I would have chosen. And he hasn’t put in closets and is offering a credit instead (is that common?), and the basement carpeting did not seem as nice as it could have been.”
That was my impression, too. Decent job of keeping it neutral, except perhaps the 2 wet bars–especially the one 10′ from the kitchen, and the choice of huge deck over larger yard.
As to the closets, I don’t think it is common, but what is common is putting in total crap wire racking in an insufficient amount (see 340 OTP standard closet, at least in the 1-BRs). So, it may be that you’re better off picking your own and not having to patch holes for the junk installed.
Too many sellers are stuck in the mindset that I paid X and need to get X back. No matter that they’re paying 98% interest every month and property taxes and taking a hit would actually probably save them”
The problem is that most of these sellers had no business buying 400K – 500K homes to begin with and had very little (if no) equity in their homes upon closing. Now the market has crashed and they are massively underwater. If these sellers didn’t have enough money for an adequate down payment in the bubbble, they certainly don’t have enough money to pay off their existing mortgage or put 20% down on a new purchase now. These sellers will most likely decide not to sell (because they can’t) and pray they don’t lose their job. So long as they remain employed, they can probably service their debt. However, the minute they lose their job, these homes will be in foreclosure.
Thanks, anon (tfo)! Yeah, I didn’t understand the wet bar on the main level either. Seems obtrusive in that back room, and as you note it’s really close to the kitchen, so why do you need it there. And it’s not connected to the kitchen you can’t use it as part of an extension of the kitchen.
Any other intel on that contractor’s reputation? Or financial status?
“Any other intel on that contractor’s reputation? Or financial status?”
Nope. But believe the realtor is the owner. Think he was doing a lot of the painting, etc., himself.
Thanks, anon (tfo). There’s a couple of similar places in the Blaine school district as well. I’m just keeping my eye on these until I think I can get something for a shade under $1MM. We’ll see if that happens. It may not. I don’t think prices will go up but they may stay flat nominally until the real prices in rationalized. But I may also come across a developer that really needs to sell soon.
Chicago property tax: Bigger bills headed this way
Cook County suburbs set to see increases too
“–Despite last year’s housing market crash, tax officials calculate that property values for tax purposes rose 8.23 percent in suburban townships and 9.96 percent in the city.”
I wonder what impact this property tax increase will have on valuations? bwhahah
Chicago property tax: Bigger bills headed this way
Cook County suburbs set to see increases too
“–Despite last year’s housing market crash, tax officials calculate that property values for tax purposes rose 8.23 percent in suburban townships and 9.96 percent in the city.”
I wonder what impact this property tax increase will have on valuations? bwhahah
http://www.chicagotribune.com/news/chi-cook-county-taxesoct21,0,5535095.story
Bob,
everybody I know assessors’ valuations went down between 12-40%
“everybody I know assessors’ valuations went down between 12-40%”
But it’s also the millrate. If I calculated correctly, my 2d half 08 taxes will be ~4.5% higher.
My assessment for 2009 went up ~0.5%; we’ll see what that means to 09 taxes payable next year.
ok i see, I was referring to the new valuations.