Market Conditions: Chicago Home Sales Jumped 28.5% in October Year Over Year
The surge in buyers rushing to get the first time homebuyers tax credit showed up in the October sales numbers. Sales jumped by double digits statewide, in the nine county area and in the City of Chicago.
While sales rebounded in Chicago, median price fell 18% year over year.
From the Illinois Association of Realtors:
In the city of Chicago, October total home sales (single-family and condominiums) were up 28.5 percent to 2,012 sales compared to 1,566 homes sold in October 2008. The city of Chicago median price in October 2009 was $215,000 down 18.0 percent compared to $262,250 a year ago in October 2008.
“We are seeing increased movement in both the single-family unattached homes, as well as in Chicago’s condo market,” said Genie Birch, president of the Chicago Association of REALTORS® and a broker associate with Koenig & Strey GMAC, Chicago. “The first-time homebuyer tax credit has created a great incentive for buyers on the fence who are ready to invest in real estate. We are hopeful that the remainder of 2009 with the expanded and extended credit will continue to positively increase home sales in our market, however continued review of lending policies is also necessary, in order to assist credit-worthy homebuyers in their investments.”
Are the increase in sales a sign that we’ve reached a bottom?
“Sales continue to offer some encouraging news and there is an early indication of a cessation of price declines in Illinois,” noted Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois. “The volatility in a number of indicators on a month-to-month basis still makes it difficult to detect a longer-term trend. With interest rates at 5 percent for 30-year loans, housing supply strong, the uptick in sales should continue; however, many potential buyers have either too much debt or are unemployed precluding their participating in this buyers’ market.”
Illinois’ unemployment rate rose to 11% in October from 10.5% in September.
“October’s extraordinary sales totals reflect home purchases by many buyers who were sitting on the sidelines of the housing market waiting out the economic downturn as well as more home sellers coming to terms with accurate pricing given the market conditions,” said REALTOR® Mike Onorato, GRI, president of the Illinois Association of REALTORS®. “The first-time homebuyer tax credit clearly was a motivating factor and an effective market stimulus to reduce inventories and help stabilize prices. The good news is that the credit has been extended through April 2010 and expanded to now include potential move-up buyers who have owned a home for any consecutive five-year span during the last eight years.”
Pent-Up Demand and Tax Credit Drive October Home Sales Rally Sales Up 24.2% Statewide and 33.3% in Chicago Region [Illinois Association of Realtors, Press Release, Nov 23, 2009]
Well, although I believe we’ve reached the bottom I don’t think this is the sign. Clearly this is the result of government giveaways. However, with inventories down, the Case Shiller index up, market times down, and the housing sector stock index up, I think those are the signs of a turnaround. The stats are pretty dramatic. You might be interested in the latest neighborhood market stats, which are linked at the bottom of this page: http://chicagohousingstats.com
Note the dramatic decline in market times – which have been recently restated by the MLS to fix some reporting errors.
BTW, just did a quick check of city of Chicago Contracts for the first 20 days of November. Looks to me like they’re up 50% over last year. I was a bit surprised because I would have thought that all the demand would have been pulled forward by end of October.
Anyway I was tempted to add a comment here like “buy now or forever be priced out of the market” (as a joke) but figured that even joking about that in this forum might incur death threats.
“Anyway I was tempted to add a comment here like “buy now or forever be priced out of the market” (as a joke) but figured that even joking about that in this forum might incur death threats.”
Well put Gary. And helpful analysis.
I believe we’re at a bottom, and its not just at the low end, at least based on anecdotes. One of my close friends was pursuing a few houses in the north shore suburbs (no first time homebuyer tax credits here) and they all went under contract after price cuts that put them “at market” so to speak. These are houses in the 1.25M – 1.50M range that are probably down 25-35% from peak sales prices.
My guess is the significant equity market recovery is having a similar stimulative effect at the high end. We’re up almost 65% since the March nadir. That is significant a reinstituion of wealth, or at least perceived wealth.
I’m not calling bottom. With Alt-A foreclosures piling up, an eventual end to government subsidies and a likely stock market dip in the near future this looks more like a brief bull run in a continuing bear market.
My guess is that everyone held off to see if they were going to get canned, and if you have a job now my guess is that you’re safe, job and finance wise. These people are in the position to snatch up some deals and are doing so.
Be careful calling the bottom in the suburbs, especially over 1m. I think there may still be 10-20% downside. Nasty inventory imbalance plus shadow inventory, prices have to come down more.
The only way to keep increasing sales volume is to keep lowering prices.
That is why the hoods with the lowest price decreases to date have yet to show the sales volume increases and declining market times.
Don’t worry, though. They will.
It’s funny to hear that the 8k homebuyer tax credit is driving all the sales, since it’s really a 8k homeseller tax credit. Once the credit is removed, prices should drop by 8k. All the credit does is bid up the prices by 8k, until it is removed.
Wasn’t there a NAR study that said that only 30% of buyers were buying because of the homebuyers credit?
I don’t think that its driving all of the sales. Who knows, perhaps record low interest rates, and falling prices due to excess inventory would be a larger cause?
The credit came in the middle of my attempt to sell my condo, so it has not affected my price.
Look, Dollface, it just means that you will get more than without the credit in place and you are now less overpriced.
If we didn’t have Realtor commissions to pay, all housing would get cheaper by 6%.
Funny that the Realtor industry is advocating for government supported tax credits to lower prices, but is not willing to lower their own fees.
No, Brad, that advocating is for propping up higher prices. The term they like to use is “stabilize.”
“Wasn’t there a NAR study that said that only 30% of buyers were buying because of the homebuyers credit?”
I seem to remember reading it was actually something like 47% of buyers using the homebuyers credit.
Maybe I can find a citation for that figure.
I believe that Sonies wasn’t referring to the number using the credit, instead, he meant the number who wouldn’t have bought without it.
A large number of the buyers are using the credit because they qualify for it (who wouldn’t?), but the estimate of the number of buyers to have purchased soley because of the tax credit is between 150k to 300k nationwide depending on who you ask. In other words, the tax credit has had a very negligible impact in getting buyers off the side lines. It helped, but it isn’t the savior of the housing market.
Lower prices and low interest rates are driving sales. Most people who absolutely needed that $8k to buy a place most likely won’t even qualify for a mortgage these days, even FHA.
logan,
There is a difference between buying BECAUSE of the homebuyer credit, and USING the homebuyer credit (some buyers, and indeed most, would have bought even without the credit). The government interventions in the market stink.
“Most people who absolutely needed that $8k to buy a place most likely won’t even qualify for a mortgage these days, even FHA.”
I don’t know about that. This seems to tell me something different:
“the Government Accountability Office concluded that in 2008-2009 more than 25,000 credits were claimed by people who reported no income and another 165,000 by those earning $25,000 or less.”
http://taxvox.taxpolicycenter.org/blog/_archives/2009/10/22/4358850.html
TO be fair, you can afford a house on $25k or less salary. The house just has to be like $80k or less and nowhere near 100 miles of chicago
Those places are cheap for a reason, Sonies. No stable jobs. Or, perhaps, only stable jobs with no stability.
“The house just has to be like $80k or less and nowhere near 100 miles of chicago”
Redfin shows 422 SFHs (incl some condos, no doubt, and a few rentals) with 3+br/2+ba in the city limits for under $100k. There probably are even some of them that are in habitable condition!
“The house just has to be like $80k or less and nowhere near 100 miles of chicago”
You can find homes in Chicago in non-prime areas but also non-crime hotspots for under 80k. Yes even SFHs and yes the selection is quite limited but its possible.
yeah i’m pretty sure about 99% of those are in shite hoods or have mold/structural problems. But I could be wrong. not like I’m looking for an 80k house to live in so I guess i’m a little ill informed.
Brad,
You don’t have to hire a Realtor. Poof, I just saved you money.
I don’t think we can call a bottom in most markets. I do think that more people can buy ONLY what they can relatively “afford” due to stricter lending and move-up properties are much more availble and stable purchases for those less affected by work loss or recession et al. If you want a home rather than “investment”, you can judge value better today. As for investments, owner/operator multi-units are attractive to me anyway.
Anecdotally, the values are there for me to be very motivated. I’ve tried to talk my wife into affordable (for us) two flats in my Chicago hood or even moving to a Wilmette single family home… properties well out of reach two years ago (she’s not moving any time soon in case you were wondering… no matter how many kids we have). There are a lot of people with similar finaces, family situation as me etc… that are feeling the same way about buying. To me, they are the market.
As for sellers…it’s still going to be a disaster for many who seemingly can not sell no matter what. But like everything, there are winners and losers right now. As an agent I’ve had some decent listing sales this year for people moving out of the city to buy nice homes in the burbs or out of state and I’ve had properties where it’s dropped more than people can bear (and more than I had anticipated even with pricing aggressively and prepping the home well).
Beware of the shadow inventory….millions and millions of people getting loan mods; those who haven’t paid their mortgage in months, maybe years…Bank of America is currently processing over 3,000,000 loan modification applications…14.4% of all mortgages are DQ or in some stage of foreclosure…17,000,000 vacant homes in the US….story after story of frightening FHA subsidized loans….
What will happen when these homes are eventually put up for sale? How long will the bleeding continue?
K’s are up – of course – because there are still some people going back for seconds on the kool-aid. You can almost smell the kool-aid on posters’ breath ….
There might be ‘deals’ today but there will be even better ‘deals’ tomorrow.
Matt Garrison on North Shore foreclosures, market conditions:
http://www.youtube.com/watch?v=czC5TV-lbo4
Buy now and be priced in forever.
Considerting market history, the current state of the job market, rents and incomes, shadow inventory ect I can’t help but think we have not seen the bottom in house prices. At some point volume will stabilize, but that does not have to reflect the bottom for pricing. We think “house prices” when we talk about a housing bottom but I think that there will be two different housing bottoms. A bottom in volume (starts and home sales) that doesn’t imply a bottom in prices
“yeah i’m pretty sure about 99% of those are in shite hoods or have mold/structural problems. But I could be wrong. not like I’m looking for an 80k house to live in so I guess i’m a little ill informed.”
And yet if you’re looking to be a landlord and make money, the most important variable by far is your cost basis. Not whether your tenants might suffer ill health effects from living in a moldy place.
Bob, if you are a landlord, mold remediation will factor into your cost basis, because you cannot rent out a place with serious mold problems. Mold remediation is very expensive.
“Bank of America is currently processing over 3,000,000 loan modification application”
I was shopping refinancing rates last week and was on the phone with a Bank of America guy, he stated it would take about 60-90 days to close.
I dont know if that was his “car saleman” pitch to get me to do it right away, or if they are that back logged?
if they were back logged that much its going to be “Shadow games” for at least another 2 years.
anyone in the banking industry wanna chime in on that?
“And yet if you’re looking to be a landlord and make money, the most important variable by far is your cost basis. Not whether your tenants might suffer ill health effects from living in a moldy place.”
Bob knows that mold remediation is expensive, he just likes to pretend he’s a hardass on here. If Bob doesn’t know that mold remeidation is part of your cost basis, then Bob is a dumbass.
Groove, depends on the applicant. First, stay away from big banks. They take forever and the schlubs in their call centers don’t know what the hell they are doing. Second, the rates suck relative to what a good independent lender can usually get.
In general, it is taking about 60 days to close a refinance, but sometimes they get done in as little as three weeks. You plan for the worst, but hope for the best. It really depends on what kind of curve balls we find during underwriting.
remediation rather. typo.
Thanks Russ,
I am not going to refinance the fee’s are not worth it, wont save me on the total interest or monthly nut that much plus dont want to extend the years either.
thank you for the tip on big banks!!!!!
i was just shopping to see whats out there. i remember that when i closed on the HELOC it took 2 weeks (if that) so when the guy said 60-90 days i was taken back. i think when i bought back in 2002 closing was like 20 days or so.
Groove, do a no cost refinance. You can shorten the amortization as well.
“Groove, do a no cost refinance”
never heard of that, i always thought (paid) fees someway or other. my rate right now is 6.07% flat no paying of points.
Groove get a teaser ARM just to tick HD off.
Yes, you pay it through a slightly higher rate than you would otherwise get, but depending on where you currently are, it still may make sense to refinance.
For example, a full fee refinance may cost you $2k in cash at say 4.75% for a 30 year fixed. However, if you take 5%, the bank can eat the $2k fees because we are making more on the loan with the higher rate.
Long term, the 4.75% may be a better deal, but this is entirely dependent on how long you plan to be in the home/keep the mortgage.
On a $300k mortgage, .25% only equates to $46/month. So it makes no sense to get 4.75% with $2k in cost versus 5.0% with no cost. It would take you 43 months to recoup the $2k before you are actually saving the $46 from the lower rate. $2k / $46 = 43 months.
So unless you are absolutely sure you are going to be in the property or keep the loan four years, the no cost loan may be the better option anyway.
“Long term, the 4.75% may be a better deal, but this is entirely dependent on how long you plan to be in the home/keep the mortgage”
there is the kicker at our house, the move debate is still at our dinner table.
russ,
i did a quick calc with the rates and fees we got, i can save $100 bucks a month (15 year fixed) and looks like it would take about 3 years to recoup the cost and interest saving are not worth mentioning.
just to give you a perspective without giving too much info on the interweb. my mortgage is only around $800 thats with escro payment (taxes goin up it may be around 900) your a banker so you can figure what i owe 🙂
so in my mind the minimal interest savings over the length and if i needed to save $100 a month it is easy to do with our frivolous spending we do. plus the possibility of moving.
you think i should just wait (and may miss out on good rates) or just skip it altogether and dont look back?
Yeah, that is your problem… you have a small loan. Doing a no cost refinance would be a lot harder. Small loans cost just as much to do as bigger loans, but the big loans pay much much better for the bank since everything is percentage based. The rate and fees necessary to make doing your loan profitable for the bank usually erode any benefit you would get due to the small size.
However, I wouldn’t sneeze at $100 bucks/month.
russ,
thank you very much for your help, its helping with the decisions we are agonizing over.
“Yeah, that is your problem… you have a small loan”
i know the guy a Chase was in disbelief when he saw the amount, the guy at midwest was even more shocked at my second (heloc). Which i think everyday i would save more if i just paid off my mortgage with the second mortgage, just too scared with what the prime rate will after a few years 🙁
“However, I wouldn’t sneeze at $100 bucks/month”
i can save that by, bring my lunch once a week, or saying NO to my wife………the best would be getting my wife a separate checking account and give her a monthly allowance, i would save 15k-20k a year with that one 🙂
Grove:
Hey. As promised my comments on Young Frankenstein, which we saw at the Saturday matinée. Great performers, dancers, and singers. Live orchestra. Beautiful theater. Nazi ushers. Strong echoes of the movie especially in how the characters played their roles and in much of the script. Only about 2/3rds full. Lots of Mel Brooks naughty bits (audio not visual), which were a hoot in the 1970s but just make for cheap laughs in this decade. Nevertheless the audience tittered at the vulgarities and seemed to have a great time. No real memorable songs although some of them were quite good. All in all not a bad time.
“Bob knows that mold remediation is expensive, he just likes to pretend he’s a hardass on here. If Bob doesn’t know that mold remeidation is part of your cost basis, then Bob is a dumbass.”
Also that Bob believes that people on here freak out at what might be a minor issue. I’m not talking about serious mold issues that make it uninhabitable. Just that there is a whole spectrum of rentals many of which aren’t perfect in every single way but are priced far, far below some multis in hip hoods. And I can guarantee you the rents aren’t 20% of the hip hood rents. More like 70-100%.
And just because a property is priced at 80k I don’t think it necessarily means it has that kind of issue. It could just be an ugly multi-unit that is perfectly inhabitable.
Err.. that is perfectly habitable. What a Freudian slip huh?
Thanks Poppa Steve,
“Nazi ushers”
worth the ticket price right there 🙂
“No real memorable songs although some of them were quite good. All in all not a bad time”
It looks like i wont have a good argument for Frankenstein and will loose to Banana. she read some reviews online this weekend and told most people said the were entertained but not wowed. reviews were mixed for banana so it looks like we might just get tickets for all three.
our dead line for final debate is friday after black friday shopping. you know after we blow a bunch of $$$$$ shopping we may not want to spring for three shows in 2009.
Groove dude,
This might have been said already, but a lot of banks are prioritizing new purchases now and getting to re-fies “when thye can”. I believe there are only so many good people left to get these deals done. Being a lending official or processor today is brutal due to banks own mistakes and Uncle Sam changing the game each week.
When rates dropped at the beginning of the year, it took 3 months for me to get a closing on my re-finance as they were pretty slammed with applicants and inquiries (the process was smooth though).
Eric,
Good to see you over here outside YoChicago 🙂
“but a lot of banks are prioritizing new purchases now and getting to re-fies”
i can see that, i few places i called weren’t even going to do an official appraisal. they said the would do a “electronic appraisal”, i guess thats just pulling comps off Redfin or something.
or maybe the tribune site
lulz