Market Conditions: Chicago Home Sales Rise 5.8% in September; Median Price Falls 16.2% YOY
The September home sales data is out from the Illinois Association of Realtors. For the first time in several years, sales rose year over year in Chicago. However, median price continued to slide.
From the Illinois Association of Realtors:
In the city of Chicago, September total home sales (single-family and condominiums) were up 5.8 percent to 1,918 sales compared to 1,813 homes sold in September 2008. The city of Chicago median price in September 2009 was $225,000 down 16.2 percent compared to $268,600 a year ago in September 2008.
“While we see a significant increase of sales, we continue to see distressed properties moving the marketplace,” said Genie Birch, president of the Chicago Association of REALTORS® and a broker associate with Koenig & Strey GMAC, Chicago. “The decrease in the median home price is also reflective of this trend as investors purchase short sale and foreclosure inventory in the city. It is more imperative than ever before that legislators extend and expand the homebuyer tax credit, not only to encourage more buyers in the market, but to afford those who are looking to buy in Chicago a tax credit feasible for the urban condo market.”
It appears to be all about the first time home buyers tax credit, as the other industry experts quoted in the IAR’s press release, urged extension of the $8,000 tax credit.
“Buyers taking advantage of the first-time homebuyer tax credit were clearly out in force in most regions statewide in September and thus building momentum for a recovery in the housing market,” said REALTOR® Mike Onorato, president of the Illinois Association of REALTORS®. “Home sale gains this month show the tax credit is working and should be extended through 2010 as it is helping to stabilize home prices and creating thousands of jobs that rely on housing. Today’s lower prices and interest rates are very appealing to consumers, but it’s the tax credit that is attracting people to homeownership. Not renewing the tax credit could potentially jeopardize a full recovery needed to get the economy back on track.”
The University of Illinois expert sees unemployment as a hindrance to a housing recovery. Illinois’ unemployment rate in September was 10.5%.
According to Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois: “There are signs that the housing market may be signaling a change in direction, although the prospect of continued large numbers of foreclosed properties will continue to exert downward pressure on prices in a market in which supply still significantly exceeds demand. The news on the sales front is encouraging and even the price declines seem to be moderating. However, the prospects of a jobless recovery from the recession will continue to exert restraint on a more robust recovery of the housing market. Illinois tends to enter recessions later than the U.S. and take longer to recover.”
Illinois Home Sales Show First Increase in Over Three Years; Statewide Median Price at $160,000 [Illinois Association of Realtors Press Release, Oct 23, 2009]
i predicted jan. but I still believe that housing would be hard press to match Jan ’09 lows. There will be a double dip due to the tax effect and if interest rates rise fast. unless the depression happens.
Not surprising considering how scared people were a year ago, and the semi useful tax credit with 16% price drops is getting buyers out there that normally wouldn’t be
Stop the hand-outs. The homebuyer tax credit is terrible.
There was a Yahoo news feature yesterday discussing how taxpayers are fraudulently claiming the credit. Problem is the IRS didn’t ask for documentation and probably don’t have the resources to follow-up. You have people who haven’t purchased a home claiming the credit. You have non-first time homebuyers claiming the credit. Article cited a 5-yr old first-time homebuyer.
good prosecute them and fine them, then tarp can get paid back.
good prosecute them and fine them, then tarp can get paid back. its fine for somebody to by thier child a house, just tax them for the gift transfer or whatever.
sorry about that 1st post.
So instead of stopping the fraud you’d rather just stop the credit? There’s several good reasons for and against the credit, but ending it because of fraud isn’t a good one. Prosecute the fraudsters and close the loopholes. Once you start prosecuting people the fraud will go down.
Honestly, I think a first time homebuyer tax credit is a good thing regardless of the economy. Right now it’s specifically designed to get all the excess inventory off the market (which is why it’s first timers only and not current property owners and it should stay that way), but I don’t see why encouraging new people to get into the market is a bad thing long term either. I don’t know if $8000 too low or too high or if it should be some other form of tax incentive, but the general concept is a good one.
The fraud is hilarious. How hard is it to ask people to send in the Hud-1 from their purchase when claiming the credit? And some folks really want the Govt running their healthcare?
The credit has largely been ineffective when you look at the numbers, so I don’t know why Realtors act like it is going to be the end of the world if it phases out. NAR is only claiming that some 325,000 people bought who otherwise wouldn’t have, yet 1.4 million people according to the IRS have taken advantage of the credit at a cost of about $15 billion. Therefore, the actual cost per additional homeowner is really around $50,000. That is not a good return on investment…
Realtors will win either way. While transaction values lower, we should see people finally realize they are up a creek without a paddle and will see more transaction volume and foreclosures. They’ll get their pound of flesh.
If you want people to have more money, cut tax rates.
“but I don’t see why encouraging new people to get into the market is a bad thing long term either.”
Because a lot of people have no business owning homes in the first place. And in general, the credit is tailored to this crowd. If 8K really makes or breaks your decision to buy, chances are you don’t have enough money to own a home.
What is wrong with renting? It’s this stupid notion that you are somehow a failure if you don’t own a home that helped get us in this mess. I actually think there should be no tax benefits to owning. Of course that will never happen because the market would crater.
Meh, the real incentive to home ownership is the deduction for mortgage interest. That is what has and will continue to make people want to own.
One little bandaid here or there isn’t going to change the whole thing that our RE system is based on (the mortgage interest deduction). What is scary is when people talk about wanting to get rid of or reduce that. RE might be a house of cards, but over the long term it has still been relatively stable and has been built on that deduction.
“1.4 million people according to the IRS have taken advantage of the credit at a cost of about $15 billion”
So, the average credit is actaully about $10,700? $8000 * 1.4 mil = $11.2B. Still not a really good deal, but ….
““1.4 million people according to the IRS have taken advantage of the credit at a cost of about $15 billion””
TAX Breaks don’t cost anything! For fucks sakes people
The IRS is saying it cost $15 billion… I thought the same thing too regarding the $8k * 1.4, but there may be some other cost in that number.
“TAX Breaks don’t cost anything! For fucks sakes people”
So, you think the USA is just going to default on all outstanding debt at some point?
The fact that the government calls tax revenues their own money and any breaks “cost” money just goes to show how big of shills the US public is.
Here’s a good post on the credit with links to source reports:
http://taxvox.taxpolicycenter.org/blog/_archives/2009/10/22/4358850.html#
This is nuts:
“In a separate study, 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. Care to wager how long it will be before those houses end up in foreclosure? If they were ever actually purchased, that is.”
In other news, Fraudie Mac announced today that its delinquency rate rose to 3.33 percent in September from 3.13 percent in August and 1.22 percent in September 2008.
Any more bottom callers to add to my list?
Sonies, you need to look up the difference between shills and marks.
We shouldn’t be blaming the tax credit for poor lending standards. The tax credit is fine as long as lenders don’t give mortgages to people with $25,000 or less in income. Properly designed and applied, a new homeowner tax credit would help get people into that first house. And we all know how hard big a hurdle it can be to get 20% together in a market like Chicago.
Honestly, if they just limited the credit to those who were putting at least 10% down into their house it would probably fix a lot of the problems. It will still get the excess inventory off the market and it would eliminate a lot of the fraud.
Of course this is the government we are talking about so there’s no way a “properly designed and applied” program will ever exist.
“What is wrong with renting? It’s this stupid notion that you are somehow a failure if you don’t own a home that helped get us in this mess. I actually think there should be no tax benefits to owning. Of course that will never happen because the market would crater.”
The wrong part is that if you get rid of the tax break then fewer people will be able to own, then maybe more restriction on land ownership are in order, 1688 here we come. land in the hand of the gentry class.
“The wrong part is that if you get rid of the tax break then fewer people will be able to own, then maybe more restriction on land ownership are in order, 1688 here we come. land in the hand of the gentry class”
No. Prices would come down to reflect the intrinsic value of the asset. All the tax credits/deductions do is inflate prices.
intrinsic value = construction cost (on a basic level) basically, where nearly past that.
If you get rid of the tax break prices will fall accordingly. How would that lead to fewer people being able to own?
If anything, the interest deduction is currently overinflating home prices due to the fact that many buyers overestimate its impact if they are already taking the standard deduction.
There should be no tax benefits for owning. They are harmful to the economy. I have no problem for tax breaks for shelter but there should be no preference for owning.
“I have no problem for tax breaks for shelter but there should be no preference for owning”
how would that work?
I wouldn’t be a proponent of it since I think simplifying taxes is the way to go.
But if some shelter currently gets deductions, then all should. Something along the lines of everyone getting a deduction based on the mean cost of shelter in an area. Or, maybe, based on the shelter costs for individuals/families just above the poverty line (the minimum cost of shelter.)
Anything along these lines would be much more fair than the current favoring of owners for the benefit of the REIC.
The best is to just remove all housing considerations from the tax code.
as long as the resulting tax code is ture progressive, counteracting regressive taxes like sales, ss, medicare, etc.
“Honestly, I think a first time homebuyer tax credit is a good thing regardless of the economy. Right now it’s specifically designed to get all the excess inventory off the market”
Doug, not sure if you understand this but the apartment and real estate markets are indeed linked. For almost every excess unit/marginal sale the tax credit takes away a renter. This depresses market rents. Also the current cost of each additional sale provided by the credit is $43,000. This is expected to surge with the extension of the credit.
“And we all know how hard big a hurdle it can be to get 20% together in a market like Chicago.”
Know why? Because of government intervention in the market is why. Its only very hard to gather a 20% downpayment in a market like Chicago because real estate is relatively expensive here (compared to the rest of the midwest). If government intervention was removed prices would indeed adjust downward significantly to what the market would bear.
Who really cars if there is fraud with people claiming the tax credit? All that happens is the IRS catches it when the fraud on the return and then the person who submitted for the credit will have to repay it.
I also agree with Anon, these are tax credits. They don’t cost the average citizen anything. If you don’t believe in tax credits then just stop utilizing them on this years returns. Don’t claim the interest on your mortgage loan (after all renters don’t get a deduction for their rent payments)
The rest of us believe that we earned the money, so we should keep as much of it as possible.
“…these are tax credits. They don’t cost the average citizen anything.”
Maybe not this year. But after the administration is done with all thier drunken sailor spending and China and Japan stop lending us money, taxes are going to skyrocket and/or inflation is going to be astronomical. Then it will cost EVERY average citizen.
I think people should also consider how the tax credit is much more powerful in communities where home prices are cheaper. You can buy a lot of home in certain areas of the country for under $100K and that 8K is huge. In Chicago, San Francisco, or NYC you can’t buy shit.
They should give a proportionate amount based on where you live.
“They should give a proportionate amount based on where you live.”
So that it’s a $30k giveaway in Chicago and $100k in EsEff and $200k in NYC?
“And we all know how hard big a hurdle it can be to get 20% together in a market like Chicago.”
Remind me again why they should give _any amount_?
And if you’re going to argue supporting lofty home valuations is vital to the economy, thats a pretty frail, fragile economy. Look out below!
“Remind me again why they should give _any amount_?”
Wrong quote, Bob.
Freddie Mac Attack
http://www.calculatedriskblog.com/2009/10/freddie-mac-delinquency-rate-rises-to.html
Sure looks like housing is due for stabilization or a rebound. LOL.
If a new condo, rent before you buy.
http://www.nytimes.com/2009/10/25/realestate/25cov.html
dd,
Are you a renter or a buyer? We are quite skeptical of new folks here like you who have a pre-ordained opinion.
Are you a happy renter or a bitter buyer? Please elaborate!
😀
Bob:
How did you decide I was “new folks” and that I have a pre-ordained opinion? We are neither happy renters or bitter buyers, but a bit of both: happy buyers. We want a second place, probably rental.
dd,
My apologies.
Well RE bottom feeders, apparently there is a new type of loan out there that piqued my interest.
Its called the Fannie Mae homepath loan and basically is described as:
“This is a special 30 year fixed rate program which requires no private mortgage insurance. We are a participant in Fannie Mae’s Home Path Program. In order to be eligible for this special financing the home must be a Fannie Mae REO. Click here to determine if your home is a Fannie Mae REO (http://www.homepath.com/).”
As I have seen some REOs that interested me this program looks especially interesting.