Market Conditions: February Home Sales Fall 7.4% YOY as Sales Remain Weak
The Illinois Association of Realtors is out with the February sales numbers.
Was January a one-off bad month or did it continue for a second month?
The city of Chicago saw year-over-year home sales decrease 7.4 percent with 1,422 sales in February, compared to 1,535 a year ago. The median price of a home in the city of Chicago in February was $273,900 up 0.7 percent compared to February 2018 when it was $272,000.
Here is the sales data for February going back to 1997 (courtesy of G).
- 1997: 881 sales
- 1998: 991
- 2000: 1383
- 2001: 1151
- 2002: 1677
- 2003: 1566
- 2004: 1814
- 2005: 2228
- 2006: 1855
- 2007: 1703
- 2008: 1454
- 2009: 870
- 2010: 1257
- 2011: 1092
- 2012: 1250
- 2013: 1411
- 2014: 1361
- 2015: 1497
- 2016: 1567
- 2017: 1529
- 2018: 1535
- 2019: 1422
Here is the Median Price Data also going back to 1997 (thanks G!):
- 1997: $117,000
- 1998: $132,000
- 1999: $143,750
- 2000: $161,500
- 2001: $180,200
- 2002: $212,000
- 2003: $215,000
- 2004: $229,900
- 2005: $268,900
- 2006: $267,500
- 2007: $270,000
- 2008: $290,000
- 2009: $218,125 (with 31% being REO/Short Sales)
- 2010: $176,000 (with 46% being REO/Short Sales)
- 2011: $150,250 (with 50% being REO/Short Sales)
- 2012: $140,300 (with 52% being REO/Short Sales)
- 2013: $158,000
- 2014 $175,000
- 2015: $212,000
- 2016: $236,000
- 2017: $246,000
- 2018: $272,000
- 2019: $273,900
“February’s data is in line with what we have come to expect as our market shifts,” said Tommy Choi, president of the Chicago Association of REALTORS® and broker at Keller Williams Chicago – Lincoln Park. “Even though closed sales are down, median sales prices ticked up and both inventory and days on market declined, showing that, as we enter the spring market, buyers on the hunt are eager to take advantage of lower interest rates and are serious once they find their desired home.”
The 30-year fixed mortgage rate averaged 4.37% in February, down from 4.46% in January but similar to February 2018.
The more important thing is that mortgage rates have continued to decline in March and are down significantly from last fall, when home sales slowed sharply.
“Housing prices continue their slow but steady increase,” said Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory at the University of Illinois. “However, year-over-year sales exhibit negative trends for the next three months although month-to-month changes are forecast to be very positive.”
Statewide, the average time to sell a home fell to 68 days from 71 days a year ago. Available statewide inventory also slumped 3% to 47,711 homes for sale from 49,193 homes in February of last year.
February sales appear to have peaked 4 years ago.
Is it still “low inventory” that’s the problem?
And if so, why aren’t the builders building more homes?
Illinois median home prices held steady in February; home sales lower but demand is strong [Illinois Association of Realtors, Press Release, Mar 22, 2019]
As I’ve been saying, if market times are still low then it must be inventory. And I have the same question about builders not building more. To be clear…they are selling as much as they have been recently and their inventory levels and market times are pretty much the same as they have been.
Slowing sales and plateauing prices. I’ve seen this all before.
Maybe it was February’s cold; it was a cold month. Or maybe we are witnessing the beginning of the correction. Even the FHA is tightening its lending criteria. The *average* score for an FHA first time homebuyer last year was 670. 670!! That’s the equivalent of paying some bills, but not others. You can’t own a house and only choose to pay some bills!
mortgage rates have been plummeting since November… (just saw a 30 year jumbo for 4% today) whats the excuse this time? It sure isn’t TAXES is it?
Sigh…
I refinanced a 5/1 HARP that I took out in 2011. I let the rate rise each year and finally refinanced to a fixed 5.25 30yr which includes the investment property “penalty” once the 1YR Libor + 2.25 premium caught up. Now the Fed says they aren’t going to raise rates this year and the mort rate market is declining. I should have left it alone.
On the plus side I have a 3.75 jumbo on my main residence, so now I can’t move….1st world problems.
I think it is a confluence of factors.
It isn’t rates as money is still relatively cheap.
Buyer expectations have changed as generational shifts continue. Hardly anyone wants fixer uppers anymore even for starter homes. Not too mention the change in design tastes. Articles in WSJ about McMansions not selling on golf courses and another article about boomers not able to sell their palatial retirement homes.
People are having kids later in life and not as stable and thus putting off buying as it is a huge financial commitment. Why buy when you can rent a nicer place and be able to move to a whim for jobs, etc?
Then you have the property tax issues. Wife and I wanted to upgrade, but the houses we like in Oak Park have tax bills pushing $30k/year. Screw that… so even though we can lock in cheap jumbo money, all we see are ever increasing tax bills with no end in sight. SALT deductions gone.
Just feels like people are kind of tapped out and expectations of homeownership are changing.
I too have a 3.75% 30 year fixed on my main residence with a real bank (not some awful servicer). My APR is lower than my interest rate, as crazy as that sounds. Let’s just say the bank really wanted to get my loan funded before the bad news hit the cable news channels … so they gave me some credits and paid my insurance premiums and waived all the other fees, and I walked away $2,000 cash – and it wasn’t even a cash out refinance. I used the $2,000 to pay my next mortgage payment. But it all resulted in an APR lower than my interest rate. At the time I was like “WOw that went fast, this doesn’t make any sense” and then three days later, I bet they lost every mortgage refi they had in the pipeline.
Where are builders going to build SFH >$1MM?
The low hanging fruit has already been picked.
As far as moving up, rates are low but it’s going to take dropping another 25% above sale price (min imo) to really upgrade. That’s a big nut especially with college for kids staring GenX/oldest Millennials in the face. The $4-700 SFH are going to be in shot supply and aggressively fought over
“It isn’t rates as money is still relatively cheap.”
Money wasn’t as cheap in the fall. We could argue whether or not 4.8% mortgage rates are “cheap” or not when, in some areas, the average home price is $1 million.
But nationwide, home sales slowed dramatically last fall when the rates hit 4 year highs. Conceivably, buyers simply couldn’t handle even a 50 basis point increase in payments with these home prices. Their incomes aren’t rising fast enough.
But now, the rates are hitting 2 year lows. It’s possible the 30-year could go back under 4%. That could be incentive to finally jump in for many people.
“Just feels like people are kind of tapped out and expectations of homeownership are changing.”
I agree about the expectations changing. Many Millennials don’t see the point in buying, especially now as there is little, or even no, tax benefit. Newer apartments are nicer than most condos anyway and they aren’t ready for a house.
Maybe we will become like Germany, with far fewer people owning a house?
“mortgage rates have been plummeting since November…”
Yes, but buyers over the last few months would have locked in the higher rates in the fall.
“Many Millennials don’t see the point in buying, … and they aren’t ready for a house.”
The average age of a millennial is now 29. Even those that delayed milestones will be getting married and popping out babies in the near future. They certainly won’t be living in all those luxury apartments downtown with free kegs in the lobby when that happens, so where will they go?
The suburbs, just like everyone before them.
“On the plus side I have a 3.75 jumbo on my main residence, so now I can’t move….1st world problems.”
I had a 3.5% 30 year fixed jumbo on my prior home and i had no problem moving
Rates seem to be headed back below that anyway going forward if the economy slows down as predicted.
“On the plus side I have a 3.75 jumbo on my main residence, so now I can’t move….1st world problems.”
“I had a 3.5% 30 year fixed jumbo on my prior home and i had no problem moving”
Just pay cash. Then you won’t have to worry about any of this.
With the limited SALT deduction and the higher standard deduction mortgages are less attractive than they used to be. In fact you would be better off converting investments to synthetic long option positions and using the cash for a larger down payment – provided you leave enough cash in the account to cover a huge swing in the market and you don’t mind rolling your positions over periodically.
“The suburbs, just like everyone before them.”
They will?
But those before them DIDN’T go to the suburbs. That’s why Lincoln Elementary is overcrowded. That’s why everyone is living in Southport and they are building $700,000 3-bedroom condos there. That’s why you can’t buy a single family home in Lakeview for under $600,000 anymore.
Do you think it’s childless people buying all those properties?
The Great Recession changed the entire game. The Chicago public schools in certain neighborhoods actually got good enough that people didn’t have to move to the suburbs anymore. Anyone else notice that the schools weren’t even a campaign issue this time? (other than closing down ones without enough enrollment.)
That’s all been GenX deciding to stay in the city.
So, no, they’re not going to move to the suburbs. Those renting in the downtown high rises are going to move to Southport or Roscoe Village and buy there.
“With the limited SALT deduction and the higher standard deduction mortgages are less attractive than they used to be. ”
I don’t know about anyone here but the new tax law is awesome for me. I took the new standard deduction and with my kids and lower tax brackets I paid $7,500 less in federal taxes this year than last year on roughly the same income. The loss of the SALT deduction appears to be minor as is the loss of exemptions, becuase the difference, plus some extra $$$$, was made up for lower tax brackets. But the higher $ phase out of the child tax credit is awesome, just awesome. I always phased out before and never took the credit but under the new law I’m getting *paid*.
““The suburbs, just like everyone before them.”
They will?
But those before them DIDN’T go to the suburbs.”
Sabrina is correct, mostly. Yes, some move to the suburbs, but many do not. There are oh so many deals on nice properties in the northern, western and southern suburbs, where 20-30 years ago virtually every *yuppie* (remember that awesome word? So underused these days) moved after they got married. I constantly hear about larger homes in lake and dupage and far flung cook (ie barrington) where the prices are STILL in free fall. Dennis Rodkin focuses on these properties i.e.:
https://www.chicagobusiness.com/residential-real-estate/barrington-hills-mansion-sells-30-its-2010-price
But the real issue is that the buyer of a far flung estate in the middle of nowhere now chooses to live in a multi-million dollar house in the city. There are still relatively the same number of buyers of these expensive properties but so many more choices now that the city has gentrified. Essentially, tastes change. The country clubs of those areas are doing poorly also, as an aside.
“I took the new standard deduction and with my kids and lower tax brackets I paid $7,500 less in federal taxes this year than last year on roughly the same income. The loss of the SALT deduction appears to be minor as is the loss of exemptions, becuase the difference, plus some extra $$$$, was made up for lower tax brackets.”
That could very well be true (though it looks like I’m worse off because my SALTs is high relative to my income) for many people but it doesn’t change the fact that now that the tax law is what it is there is less benefit in owning a home. If you use the NYT rent/ buy calculator and put in a 0 tax bracket to reflect the loss of the deductions it pushes out the breakeven point.
The Trib quotes a lender saying
“Millennials tend to overestimate what’s needed. They tend to anchor on the traditional 20 percent down payment. You don’t actually need that much . . . If you have a credit score of 600 or more, you’re a candidate”.
The story cites a school teacher who
“worked with a realty agent who was conversant in Federal Housing Administration loans and who recommended an FHA loan that required only a 3.5 percent down payment, plus a different program that covered many of the closing costs. After buying a two-flat with only $4,000 out-of-pocket, Johnson now collects rent instead of paying it: She lives in one unit and rents the other. “My rental income covers a little over 90 percent of my monthly mortgage payment,” she said.
https://www.chicagotribune.com/classified/realestate/ct-re-millennial-student-debt-homebuying-20190331-story.html
“My rental income covers a little over 90 percent of my monthly mortgage payment,”
Yeah, that doesn’t happen in the green zone. Cap rates are too low.
The 3.5% down loans have HUGE fees. Not only do you pay thousands of extra at the closing (which is conveniently rolled into your loan) but you will pay several hundred dollars a month in the PMI and it can’t be discharged for the life of the loan (unlike PMI.) You will pay the extra fee forever.
One of my friends did one of these loans but he, too, only put down like $10,000 to buy a $300,000 house with one of these loans. He thought it was the greatest thing but his extra PMI payment is $250 a month in addition to the mortgage. It’s like lighting your money on fire.
“put down like $10,000 to buy a $300,000 house … his extra PMI payment is $250 a month”
18% premium on the mortgage payment?? Really???
ok, looked it up. For a $290k loan, and 96.5% ltv, would be $205.42/month for the first year. OK, yeah, there’s the 1.75% upfront added to the loan balance, so it’s actually $295,075, making it $209.02 monthly. On a loan that $1395/month for P+I–still 15% premium on the payment.
Sabrina, the problem is if you don’t have a twenty percent down payment or one of the lucky few to have access to the bank of Mom & Dad, then you really don’t have any options if you want to buy. You are going to pay a premium somewhere for lack of down payment.
It is far easier for some people to absorb the monthly PMI hit than to save up for a twenty percent down payment, particularly in relatively high cost of living areas.
FHA is really only appropriate if someone doesn’t have perfect FICO scores (>700) as conventional loans do offer lower down payments (3%) and the MI is typically cheaper.
It is far easier for some people to absorb the monthly PMI hit than to save up for a twenty percent down payment, particularly in relatively high cost of living areas.
Russ, we both know that 95% of first time buyers are NOT putting down 20%. Everyone thought it would come “back” after the financial crisis, but it never did. The banks were still lending with much less down. Yes, you had to pay the PMI, but so? Buyers don’t care. They care only that they can buy.
It would take them a decade to save the 20% downpayment, so they’d rather just pay the PMI and build equity quicker that way.
“OK, yeah, there’s the 1.75% upfront added to the loan balance, so it’s actually $295,075, making it $209.02 monthly. On a loan that $1395/month for P+I–still 15% premium on the payment.”
I haven’t seen his mortgage statement anon(tfo). I’m just relaying the story. Maybe he exaggerated the $250 a month. Based on your calculations, he did. But it’s still $210 extra a month that can NEVER be expunged. Once you have that loan, you have it (unlike the regular PMI.) And the 1.75% fee added to the loan balance is horrible too.
But he’s now an “owner” right?
I suppose there are worse things. At least he’s building equity. The $210 could go to a car payment.
I just posted my March update. Sales were down 11.6% from last year – IAR will report around a 13.6% drop though. But inventory remains low and market times fast. Judging from the low contract activity I’d say that there are more low sales to come. http://www.chicagonow.com/getting-real/2019/04/chicago-real-estate-market-update-another-5-year-low-in-home-sales/
” I’m just relaying the story. ”
I know; I was just shocked, and then had to run the numbers. There’s prob a little rounding up, but it’s more in the ballpark than MG’s square footage numbers.
“But inventory remains low and market times fast. Judging from the low contract activity I’d say that there are more low sales to come.”
If there was really strong demand, prices would be soaring. But they’re not. Not like they were a few years ago when the market also had a low inventory situation. Back then, there were bidding wars. Is anyone hearing of multiple bids this spring? I haven’t but I’d love to hear some stories if people have them.
I do think remodeled properties at appropriate prices are selling really fast. Buyers have been waiting for more “new” properties to come on the market after a dud market over the winter.
“If there was really strong demand, prices would be soaring.”
It’s a question of degree. If people were desperate, yes. But demand can be strong and yet buyers decide they are not going to overpay.
“Back then, there were bidding wars. Is anyone hearing of multiple bids this spring? I haven’t but I’d love to hear some stories if people have them.”
Yes, I’ve heard a few, much to my surprise. We have friends looking for a TH/SFH in the lakeview/roscoe village neighborhoods. Price range is $750K-1MM. They’ve lost two places now in a multiple offer situation. Both places went for an over list, all-cash offer. Here’s one of the places they were looking at. Their agent said they had 11 offers, one all-cash.
https://www.redfin.com/IL/Chicago/1918-W-Newport-Ave-60657/home/13386876
Beautiful place Marie. My wife and I looked at those rowhomes ages ago. We didn’t quite have the money then to take one on.
re: the Newport RH Marie posted: the original floorplate was (generously) 725 square feet. The addition on the first floor, per the floorplan, is (generously) 225 square feet. Which totals 2400 sf, with a decent amount of rounding up, and no deductions for interior walls or stairs.
How on earth can they justify the false precision of 2513 sf?
That said, it’s very nice, and I could live there, albeit I wouldn’t be happy about $900k for the amount of space.
“Yes, I’ve heard a few, much to my surprise. We have friends looking for a TH/SFH in the lakeview/roscoe village neighborhoods.”
Thanks for the update, Marie, and the link to that Newport rowhouse. We’ll have to see what it sells for.
They bought it in 2015 for $770,000 and it’s currently listed at $887,000.
Why is no one complaining that ALL of the wood moldings, and even the fireplace, were painted white??? Lol.
As I’ve said before, the moldings look so much better painted (fresher, newer, more modern.) Sorry! (not sorry)
The listing says it has a new kitchen and bathrooms. Will those sellers even make anything on this? Even if it sells over ask?
And does that mean it has to sell for over a million dollars next time for the buyers to make anything? Would be surprising to see one of these in that location sell for a million bucks. But this is the “new” market. Some neighborhoods are hot!
This one is also far enough away from the El line to not be a factor. Other rowhouses aren’t as lucky.
“Other rowhouses aren’t as lucky.”
Speaking of…
https://www.redfin.com/IL/Chicago/1827-W-Eddy-St-60657/home/13386796
I really like the feel of that block of Eddy, but the train noise is a real issue and bummer.
If one looked at both this one and the one Marie linked, I’d feel pretty darn good paying more for the one on Newport.
Sabrina that whitewashed row house is as boring as the day is long. Happy now? I thought about noting it earlier but it’s just so lame it wasn’t worth the effort.
“Speaking of…
https://www.redfin.com/IL/Chicago/1827-W-Eddy-St-60657/home/13386796
I really like the feel of that block of Eddy, but the train noise is a real issue and bummer.”
anon (tfo) – I believe you are a CPS family as well? While both arguably good schools, the feeling in our friend group is that Hamilton is more desirable than Audubon. Schools make a big different in price in these neighborhoods. You can get much more bang for your buck in Jahn vs. Burley, etc.
“Hamilton is more desirable than Audubon”
Huh. I wouldn’t say I am surprised, but I did not know that. Tho Miranda does have a pretty big penumbra.
They are pretty similar, demographically and measurable outcome wise.