Market Conditions: Chicago Home Sales Continue to Slide, Down 11.3% Year Over Year in July
While sales rose year over year for the state and the 9-county Chicagoland region in July, according to the Illinois Association of Realtors, Chicago still saw a 11.3% sales decline and the median price fell 18.3% year over year.
More interestingly, sales also fell month to month, declining 0.4% from June into July.
From the IAR:
In the city of Chicago, July total home sales (single-family and condominiums) were down 0.4 percent to 1,975 sales compared to June 2009 sales of 1,982; sales were down 11.3 percent from 2,226 homes sold in July 2008.
The city of Chicago median price increased 1.1 percent to $245,000 in July 2009 compared to $242,275 in June 2009; it was down 18.3 percent from $299,999 a year ago in July 2008.
“Chicago continues to show a leveling of the marketplace as we see distressed properties being absorbed. With that said, we are a long way from seeing a stable real estate market in Chicago, and we face challenges surrounding lending that do not take into account real local market conditions,” said David Hanna, president of the Chicago Association of REALTORS®. “Policy changes are still needed before Chicago can have a healthy real estate market, and a full economic recovery.”
Sales continue to be slow for homes over the conforming loan rates and those needing jumbo loans, where credit is tighter.
“There appears to be increasing evidence that the housing market is segmenting—by price and location—generating significant heterogeneity in performance. Thus, the housing market is not only varying in performance across metropolitan areas but there is almost more variation within each of the metropolitan areas,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois. “It appears that there are more problems at the high and low ends of the market but there is evidence that distressed sales—through foreclosure and short sales—decreased in May and June to the 31 to 33 percent range of total sales from a high close to 50 percent during the first part of the year.”
Adds Hewings: “Once again, while sales have exhibited a rebound, there has been no rebound in prices—a phenomenon observed nationally and not just confined to Illinois and Chicago.”
July Illinois Home Sales Show Solid Activity, Sales Totals Nearly Even with a Year Ago; Sixth Monthly Increase [Press Release, Illinois Association of Realtors, Aug 21, 2009]
I believe we will see volume increase gradually as prices decrease. Prices will level out within 12 months and stay relatively flat for 2-3 years.
Even if prices level out for the houses that actually sell, it doesn’t mean that the unrealistic homeowner will lower their price to make the sale. So the market will stay anemic for years as the lower priced properties sell quickly and the high priced properties languish.
speaking of unrealistic sellers:
I’m not usually a big fan of HGTV/TLC home reality shows, but..
there is this show called Real Estate Interventions. Basically its feature people that have not been able to sell there place and they need a reality check.
All the sellers are stuborn and believe that there house is the one special house that the current reality does not apply to. The best part is when the ybring the seller to a recently sold comp that is usually nicer and sold for less, then the sellers proceed to bash the sold comp.
I recommend the show, I’m sure lots of people here would enjoy the misery.
“Even if prices level out for the houses that actually sell, it doesn’t mean that the unrealistic homeowner will lower their price to make the sale.”
Not only that, once people think the market has hit bottom, there will be a flood of new sellers who didn’t want to sell into a distressed market. This will continue to put downward pressure on home prices, so we are in for a long period of anemic growth. Unless of course, the govt cranks the printing presses into high gear and inflation gets out of control…
Even if the government cracks the printing presses up full steam ahead, if the money doesn’t make it into consumers pockets, it won’t make a world of difference in home prices. Ask your boss for a raise and see what he says. He probably took a pay cut himself.
sorry, cranks…no cracks
Misery loves company! I’ll have to watch that show, I usually hate HGTV (even though I found out my condo was on it!) because its all about ‘equity this’ ‘upgrade that’ and all about profits and not making a home a place to live in.
I think the fact that prices increased M/M is interesting, I was not expecting to see that. And the fact that volume has slipped only 11% Y/Y from last summer’s ‘end of the bubble’ summer isn’t as bad as I had expected. It will be very interesting to see Y/y numbers looking forward as we go to a 1 year anniversary of LEH & Aig and the rest of the banks nearly blowing up.
“Not only that, once people think the market has hit bottom, there will be a flood of new sellers who didn’t want to sell into a distressed market.”
Why would a flood of people want to sell their homes at the ‘bottom of the market’??? You’d think they would want to sell when times are better.
“Unless of course, the govt cranks the printing presses into high gear and inflation gets out of control…”
Our government has practically no control over wage inflation.
“All the sellers are stuborn and believe that there house is the one special house that the current reality does not apply to.”
I think more often than not its that they can’t lower their price beyond a certain point because they can’t bring enough money to the table to cover their current mortgage. Remember those who wish to ‘trade up’ houses every few years are probably a large segment of the sellers. Those who never bought into the ‘trade up’ real estate game are probably under-represented and aren’t underwater so can indeed deal.
I’d also suspect the ‘trade up’ houses segment is also in worse financial shape than those who never bought into this paradigm because it seems via their behavior they like instant gratification. So they likely used less conventional financing to boot and have a lower amount of equity in the place, often none at all and/or negative equity.
Howmuchamonth crowd doesn’t understand equity, savings or wealth–they only understand getting the maximum ‘toy’/consumption the bank will allow them.
“Even if the government cracks the printing presses up full steam ahead, if the money doesn’t make it into consumers pockets”
From what I’ve heard, 15%-20% annual pay increases were not uncommon in the Carter era.
MJ,
With unemployment where its at high raises are out. Employees have no leverage when theres a guy in the unemployment line with more experience willing to do their job for 20% less.
“From what I’ve heard, 15%-20% annual pay increases were not uncommon in the Carter era.”
Not gonna happen, they’ll just move your job to Mexico or India instead… Thanks NAFTA!
“they’ll just move your job to Mexico or India instead… Thanks NAFTA!”
You do realize that “India” is a nation in southern Asia and not an American Indian nation somewhere near Canada, right?
NAFTA is primarily a tariff agreement. How many people reading Cribchatter work on a factory line?
Also, last time I checked India wasn’t in North America.
They may move your job to Mexico or India, but it will not be due to NAFTA.
“Thanks NAFTA”
Go protectionism!
Don’t even want to get started on all the merits of free trade.
It was a joke, I should have clarified… That’s what all the pro-protectionists are blathering on about.
One of the first things you learn in economics is that nobody wins a trade war.
Sonies that quote is a joke but sounds like you know how to parrot well.
Howabout the workers whose wages are kept higher by an amount greater than increased consumer prices?
One of the first things you learn in economics is its all theory. There are _definite_ winners and losers depending on the economic policy being supported.
Maybe free trade maximizes overall welfare is the prevailing but even that can be disputed.
Well when you have stupid government intervention like in the US and then a bordering state with no laws and cheap labor, that’s where all our manufacturing is going to take place, and why places like Detroit are doomed. Its better off for the American consumer because we now get cheaper goods while working less physically intensive jobs.
On the whole and in the short term, yes. But service sector jobs don’t tend to pay as well as manufacturing jobs. Yea I agree its good China is poisoning their environment and not us. But ‘everyone benefits’ is a very broad statement. In fact I think now with a tapped out consumer and no economic recovery in place we may see free trade make a retreat from prominence in the years ahead.
The supposed benefits of global trade are only met if the playing field is level and I’m sure in economics textbooks it is.
Economic theory is like Black-Scholes. Its treated as a hard science by students who take classes in it but they don’t understand the nuances and that its really just theory. In fact I liken it to a secular religion. Ever wonder why there are so few numbers used in economics textbooks?
Because data supporting the theories is scarce. IS & LM curves? LMAO. Yeah and the spaceships are going to land in 2015 too.
Well if you take more than Econ 101 like I did you’ll find plenty of numbers, waaaay too many numbers, and obviously its theory, but at least I didn’t have liberal nutjobs teaching me in every class like all the other classes I took at my B10 school.
When the money presses crank up mortgate rates will skyrocket like they did in the 70’s, making the housing situation even worse.
“Unless of course, the govt cranks the printing presses into high gear and inflation gets out of control…”
Another possible outcome is the banks just sit on the excess money and keep them as reserves (which are now paying interest, BTW), to rebuild bank balance sheets. Which is already happening.
Borrow for free from the Fed and store all excess capital as reserves earning interest (I think over 1%). One way to slowly recapitalize bank balance sheets.
Only way inflation kicks in is if people have access to the increased money supply. Which they won’t as banks won’t make reckless loans (again).
Downtown apartment rents, occupancies rise
http://www.chicagorealestatedaily.com/cgi-bin/news.pl?id=35227
Downtown rents aren’t going to rise much next year, when the two K-Station high-rises open up, the high-rise on Kinzie across from the Merch. Mart opens up, the high-rise on Washington opens up…
I would bet that much of the July increase can be attributed solely to the fanboys that were ready to pay whatever was asked just to live in Aqua. Has anyone seen rents over there?!? Beyond ridiculous!
Hey if I was one of the younger i-bankers to still have a job I’d probably rent at Aqua, too! Its not like you’re taking any sort of principal risk and its got great amenities.
Any idea what the heck is going on with FNM & FRE rallies? Volume off the charts and crazy gains.
Who says the market is efficient?!
Lots of interesting things going on here. I think it’s significant that in the Chicago PMSA July was the first month in 3 years that saw sales actually rise YOY. See the second graph here: http://blog.lucidrealty.com/chicago_real_estate_statistics/
Maybe Chicago hasn’t turned the corner yet but the broader area has.
Having said that, I think a lot of this is a result of buyers trying to get that tax credit. The government in their infinite wisdom is pulling demand forward. So wait until early November when it will be too late to close in order to get the tax credit and demand is going to fall off the cliff. Right now realtors that I know are busy as hell.
All the action is at the low end – hence the decline in median prices which basically only shows that more low end stuff is selling. This is the portion of the market most affected by the tax credit.
When sellers are presented with the data it’s hard for them to resist a price drop – unless they can’t afford to sell for less. In that case they just decide to wait until they can afford it. If they’re waiting for the market to come back they are deluded. We all know that in the long run housing only appreciates at the rate of inflation.
If the credit is not extended Chicagoland will get a 1-2 whammy this winter with the tax credit not being available and the seasonal effects of cold weather.
However, I fully expect our government (again in their “infinite wisdom”) to extend the tax credit at least another six months at a time.
Look for it to be semi-permanent as many other interventionist measures like ZIRP, TALF and other measures. Maybe even extending TLGP. I hope I am wrong.
It makes sense volume is picking up in the burbs. While I don’t follow them closely like the city from my observations the burbs must’ve had much bigger price discounts to get the CS index back to 122 as I haven’t seen nearly as much of a reduction in the city neighborhoods I follow.
Maybe 15% reductions in the city vs. 27% reductions the CS index from peak for Chicagoland SFHs so maybe the burbs explain the gap.
Good post Lucido. Always strong wisdom from your posts.
That said, I appreciate and look forward to even more gov backed programs to help get the RE market back on it’s feet. $8500 does not go as far as it used to, esp for first timers. If AIG and JP can get help why not make some fundage available to more EDUCATED first timers as well?
I knew there would be a positive point made from this thread, albeit a small one.
The protectionism hawks are otu. Smoot-Hawley worked great, didn’t it?
“From what I’ve heard, 15%-20% annual pay increases were not uncommon in the Carter era.”
Do you REALLY want to relive the Carter years?