Market Conditions: January Starts Off Hot, Hot, Hot: Will 2017 Be a Record Year?
The January sales numbers are out and it was another strong month. It obviously also helped that there was no snow or bitter cold during the month.
So what else is there to do? Might as well house shop.
From the Illinois Association of Realtors:
The city of Chicago saw a 9.3 percent year-over-year home sales increase in January 2017 with 1,528 sales, up from 1,398 in January 2016. The median price of a home in the city of Chicago in January 2017 was $256,000, up 12.4 percent compared to January 2016 when it was $227,750.
Sales Data Since 2006 (thanks to G for the older data):
- January 2006: 2009 sales and median price of $258,000
- January 2007: 1850 sales and median price of $279,900
- January 2008: 1203 sales and median price of $290,000
- January 2009: 918 sales and median price of $205,000
- January 2010: 1237 sales and median price of $195,000
- January 2011: 1034 sales and median price of $150,000
- January 2012: 1123 sales and median price of $149,000
- January 2013: 1521 sales and median price of $157,000
- January 2014: 1383 sales and median price of $200,750
- January 2015: 1348 sales and median price of $220,000
- January 2016: 1398 sales and median price of $227,750
- January 2017: 1528 sales and median price of $256,000
The median price really jumped year-over-year but, remember, that just indicates the “mix” that is selling city wide. More higher priced properties were closing than those on the low end.
“We came out of the gates blazing, with greater activity this January than in years past, as consumers emerged from the holidays educated, prepared and ready to make decisions,” said Matt Silver, president of the Chicago Association of REALTORS® and partner at Urban Real Estate. “Our year-over-year numbers continue to demonstrate the strength of the Chicago market, as properties are being snatched up at a pace rarely seen, with higher prices across the board and rising interest rates – trends that will continue (barring ongoing inventory concerns) into the active spring season.”
“Illinois median prices have already recovered to the pre-bubble levels while those in the Chicago PMSA are very close,” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. “Forecasts for median prices and the REAL Housing Price Indices (REAL HPI) also indicate moderate annual growth for both Illinois and the Chicago PMSA with a slightly stronger growth forecast by the REAL HPI for the next three months.”
Inventory continues to be tight. We chattered about this last year and it has actually gotten worse. Statewide, the average time it took to sell a home was 69 days, down from 79 days.
Mortgage rates remained higher but haven’t continued to rise since the initial November surge. The 30-year fixed mortgage rate averaged 4.15% this year versus 3.87% in January of 2016.
It looks like more inventory just isn’t going to be a reality.
What does that mean for buyers?
Will every purchase in the GreenZone be a bidding war?
How high will prices soar this year as a result?
January brings uptick in Illinois home sales and prices [Illinois Association of Realtors, Press Release, February 22, 2017]
Economically things are really heating up thanks to the new found hope that because the anti-economy democraps aren’t in control anymore and aren’t going to tax us to death…. everyone I know is doing extremely well, buying cars, going on vacations, getting raises and bonuses, throwing parties, fancy dinners, etc.
Lets hope the city of Chicago doesn’t continue to stop on their own dicks by creating new pointless nickel and time taxes that are just money flushed down the toilet to pay for people who don’t even work or live here anymore.
^amen to that.
though, i wouldnt hold my breath.
looks like I struck a nerve with the clueless liberals here LOL
this clueful moderate abstained since I agree with your last paragraph.
BS aside,
Does this concern anyone – that we’re returning to basically prebubble and bubble prices?
I acknowledge that sonies MAY have s point about the market responding to the new administrations (expected?) economic policies – but as a local the prices just strike me as unrealistic…
I’ve got one anecdata point towards a bubble. Builder put a brand new home down on a major street with lots of semi traffic going to a local manufacturing plant and a block away from a busy firehouse. Price? $890k on a home that’s on a less than standard lot size.
I noticed this last eruption of construction took place on less than ideal lots because people wised up that they could ask a mint for their old frame houses. The cheap stuff is almost gone in the green zone so cost of opportunity is much higher. Lots of new stuff on Western Avenue and Lincoln north of the square.
People still bought even on major thoroughfares such as Western and Irving, but I’m noticing some units are turning over in about a year. Can’t open windows and expect to keep the home clean with all of that exhaust right outside the front door.
I’m also seeing the $1.2mm homes for sale in my neighborhood are starting to stagnate. Not like this area has a killer elementary or high school to draw those people in, much less good public transportation. So what’s the justification? Or is it desperation because, as HD says, builders gonna build?
(doesn’t look like post went through the first time, apologies if it doubles)
This is actually a great time to be buying a SFH in much of the green zone. Plenty of inventory available. Highest in like 5 years in some areas like Lake View. However, both inventory and market times continue to rise.
New construction can sell fast and builders are paying a premium for teardowns that can support $2 MM+ homes.
Gentrifying areas that offer more affordable new construction or rehabbed SFHs are doing well also.
Condo inventory much lower.
“This is actually a great time to be buying a SFH in much of the green zone.”
You’re right Gary. They’ve overbuilt luxury SFHs. There are plenty of those to choose from now.
But condos under $500k? Or a SFH under $400k? Much, much hotter. Those are going under contract within days. A tale of two markets.
Can we keep the ‘libtard’ nonsense in the Breitfox comment section please.
Chicago’s prices will almost certainly plateau. As they reach bubble levels and a bit beyond, underwater owners will sell up, which will keep a lid on things. After that, prices will simply match employment and wages, thanks to Chicago’s huge undeveloped tracts close to the Loop. Supply meeting demand. Which, of course, is exactly what should happen in a healthy real estate market.
Again, the crowd here seems to think that Chicago real estate doesn’t exist south of of Roosevelt.
Large number of single-family homes going up in Bridgeport and McKinley Park south of 35th: Nice places, too; over $500K in many cases. I notice several SFH new constructions here in McKinley, including some tear-downs/flips.
Last fall, a developer pitched a TOD for Archer & Leavitt at a community meeting; the crowd shot him down due to parking concerns, but there seems to be a growing interest in things on this side of town.
The fastest growing demographic in the city is high income households. High priced homes are needed to house these people.
There is plenty of supply coming on. There is the whole South Loop thing. Then there are the 42 new homes in Bronzeville + others by builders such as JaccobDaBuilder (yep, that’s his name). There are rehabs and teardowns all over. Just look for the blue dumpsters.
Still need more jobs here in the city, although recruiters and suburban companies are finding out that younger folks don’t really want to commute if they don’t have to. Lots of well paying organizations are setting up their HQ or large offices in the Chicago CBD for better access to talent in this tighter job market, I think we have gained some real momentum here, hopefully it continues.
“returning to basically prebubble and bubble prices”
For them to be really bubble prices, they need to be 17% above bubble prices.
The median is driven largely by ‘howmuchamonth’ buyers, but the higher end certainly can be seen as bubbly priced.
“Gentrifying areas that offer more affordable new construction or rehabbed SFHs are doing well also.”
so what could someone hope to get for a tear down in Humboldt Park? Asking for a friend.
It very much depends on where exactly it is. Generally speaking further east is more valuable of course. There is the Eastern part of the community area of Humboldt Park and then there is the western part of West Town that people often refer to as a neighborhood called Humboldt Park.
And the best thing to do is put it on the market because I’ve seen developers come in and get stuff below market.
“It very much depends on where exactly it is.”
Uh, yeah.
California & North? Maybe over $400k.
Pulaski and Chicago? You *might* be able to get someone to take it off your hands for $10k. Meaning you give them $10k to assume the liability of that teardown.
“There is plenty of supply coming on. There is the whole South Loop thing.”
Which “South Loop thing”?
The River Line project is, mostly, apartments- not condos. Will have a handful of townhouses that will probably be sold.
Are you talking the development further south past Roosevelt? That will be a huge development but they haven’t started on it. You’re talking 10 to 20 years out for that to be built out. Even the River Line is going to take 5 to 10 years to completely build out.
Anyone else go to open houses this weekend or look at properties, in general?
Hot, hot, hot.
The agents are grouping the showings now so that they get everyone in at the same time (some places had over a dozen buyers show up.) This is mostly at the “lower” end- which is under $500,000.
There’s simply not enough on the market under $500,000 in the GZ.
“After that, prices will simply match employment and wages, thanks to Chicago’s huge undeveloped tracts close to the Loop. Supply meeting demand. Which, of course, is exactly what should happen in a healthy real estate market.”
Not if it’s apartments.
Developers are already saying that building $400,000 2/2s are a thing of the past. The numbers don’t add up. So if that’s your price point and you’re looking in River North you’re limited. Soon- you won’t even be able to buy it in “old” construction.
There’s only so much demand for the upper end- but that’s where they’re building right now. There are, what, 5 to 10 new condo buildings going up where the price points are $800,000+.
“Which “South Loop thing”?”
Apartments count as supply. Renting competes with buying.
“Apartments count as supply. Renting competes with buying.”
Does it?
It depends on interest rates, rental prices etc.
If it truly was an equal “either/or” then no one would be buying condos now with 8,000 apartments going up downtown. They’d all just rent and get their 1-3 months free rent. But they’re not.
I was at an open house where 20 buyers showed up today. Why weren’t they at apartment sales centers instead?
All those apartments aren’t going to depress condo prices. If anything, it will make condos even more valuable unless we’ve become Germany where more people desire to rent than to buy.
“If it truly was an equal “either/or” then no one would be buying condos now with 8,000 apartments going up downtown. They’d all just rent and get their 1-3 months free rent. But they’re not.”
I’m totally lost. It’s not binary. You don’t get everyone buying or everyone renting. These are substitute products and the demand curves shift depending upon the relative price of the two. And how could more apartments possibly make condos more valuable? And if people aren’t renting then rents will go down until they do rent. I rented for 12 years until buying became clearly cheaper.
Actually I mis-spoke. Technically the demand curves don’t shift based upon the relative prices of the two but you get my point.
Gary, do you mean the prices shift along the curves instead of the curves themselves shifting? If so that is nominally true but at some point, based on economic pressures, the curves themselves will shift, e.g. If rentals and purchase inventory are in relative equilibrium and something, like 8K new rental units come online in a short time frame or mortgage rates shoot up significantly in a short period of time.
Yeah, I realized that you have both movement along the curves and curve shifting going on but I didn’t want to take the time to try to explain it all. You did a nice job 🙂
“I was at an open house where 20 buyers showed up today. Why weren’t they at apartment sales centers instead? ”
probably because they already have a place they are living in?
or are the homeless showing up to open houses now?
Current owners are more likely to buy again. Current renters are more likely to rent again.
From what I’ve seen, far too few people “do the math” in the choice between renting and buying. A lot of renters that seem to be looking to buy, end up renting again. It has to be rare that someone looking to rent ends up buying.
“probably because they already have a place they are living in?”
Right. That’s the whole point.
They are already renting. So why would they buy? They may, literally, be renting across the street since they were looking in River North.
Gary was arguing that all those apartment buildings are “inventory” so there won’t be condo buyers because they’ll just be renting instead.
Really? Then where’d the 20 people come from? Why are there bidding wars for these properties? Why are they going under contract within days at this price point (which is similar or cheaper than renting)?
“And if people aren’t renting then rents will go down until they do rent. I rented for 12 years until buying became clearly cheaper.”
But that’s not how people think Gary. Too many other factors involved in buying.
Until a few years ago, it was generally cheaper to rent than to buy. In fact, for the prior 10 years it was cheaper to rent than to buy in Chicago but that didn’t stop developers from building thousands of condos and for people to buy thousands of them. They could have rented for less from 2000 to 2013.
Now it’s the other way. Rents will decline, however. But now condo prices are soaring.
If you’re looking for a 2/2 in River North under $400,000, it’s going to be really, really tough. Prices for 2/2s are now $500,000. Also true in Lincoln Park, Lakeview, Bucktown etc.
The low interest rates worked! They have reflated the housing market. We’re well past peak in the GZ now. And prices are still skyrocketing higher.
But I don’t see how couples who have decided to buy are suddenly going to keep renting just because rents are going down. All of their parents are whispering in their ears… “you need to buy. Renting is throwing your money away.” So they do.
“Really? Then where’d the 20 people come from?”
Those are the people that want to buy. No doubt there is more demand than supply for condos at many price points. That doesn’t mean everyone wants to buy and nobody wants to rent. That wouldn’t make sense.
Yes, there are plenty of people out there not making economically rational decisions but at some point they have no choice because the differences become stark. Rents and prices can only move so far from economic parity. And if you could sell condos for more money than you would make off of renting out the same units why would you build apartments or why would you not convert them to condos?
And we are not “well past the peak” across the board in the green zone. I’ve seen plenty of SFHs that have nicely appreciated but many condos have not (anecdata). It’s been 10 years and the finishes from 10 years ago get a discount now.
“Really? Then where’d the 20 people come from? Why are there bidding wars for these properties? Why are they going under contract within days at this price point (which is similar or cheaper than renting)?”
perhaps they want to lock in a fixed rate on their housing and are sick of the rent hikes and associated transient lifestyle?
And if you could sell condos for more money than you would make off of renting out the same units why would you build apartments or why would you not convert them to condos?
Can’t build condos because the banks won’t give them the loans. They have to sell at least 50% of the units pre-market to get the bank loans.
Why aren’t they converting? Because they paid too much to build the apartments. Can’t sell the 2/2s for $700,000 which is what they’d have to do to make money.
So it sounds like you agree with me Gary. The 8,000 apartments are NOT inventory for the condo market. Two separate things. So they can build 10,000 apartments and that won’t relieve the pressures on the condo market that are pushing prices to all time highs- and higher and higher and higher. (at least on the condo side.)
“And we are not “well past the peak” across the board in the green zone. I’ve seen plenty of SFHs that have nicely appreciated but many condos have not (anecdata). It’s been 10 years and the finishes from 10 years ago get a discount now.”
If you’re not updating your property every 5, 10, 15 or 20 years- that has nothing to do with whether prices are past peak or not in the overall market. It just means you’re a lazy and/or cheap homeowner and, yes, you’re not going to get a premium for your property. If you never paint your place or mow the lawn, you’re not going to get the same money as the homeowner that does. That’s just common sense.
But the market is WELL above peak all over the GreenZone now.
It’s insane where prices are going. Some of the condo owners who haven’t updated are stupid. They don’t know how easy it is to fool buyers.
My god people. At LEAST put in new bathroom vanities. This literally cost you like $1,000 total at the Home Depot for a standard condo bathroom. Even that will pay for itself and look all pretty. You don’t even need new tile!
“Why aren’t they converting? Because they paid too much to build the apartments. Can’t sell the 2/2s for $700,000 which is what they’d have to do to make money. ”
Once the building is built it’s a sunk cost and from that point on all that matters is how do you get the largest NPV. You’re telling me that the building is worth more as a rental than as a condo. That means the demand for rentals is high enough to keep rents that high and the relative demand for condos is lower and that condo prices are low, which is inconsistent with the soaring condo price narrative. No, I don’t agree with you.
You keep saying that prices are past peak. First, if you bought a condo 10 years ago for $400K, put $50k into it and it’s now worth $450K in my book that’s 0 appreciation. Show me examples of condos that are past peak and I’ll show you many others that are not. That’s not rhetorical.
Sabrina – – totally agree on the bath vanity point. Ikea has some really cool looking ones and as far as I can tell the quality is pretty much the same as Home Depot but you can accessorize the interior storage compartments for a little more wow factor. Cleaning up your grout with a grout color pen, swapping out your sad disgusting medicine cabinet for a new one or just a mirror, again from Ikea, can do wonders. Jazzing up your hardwoods with one of those temporary poly-based floor enhancers. All cheap things that make a place sing a little and can be done without hiring a professional. I am convinced that at the entry level price point, things like this really set a unit apart because you are talking a buyer who has probably never had the new vanity, new fridge, new washer / dryer – – all appliances that can be upgreaded well above “developer special” quality for not much more money.
“You’re telling me that the building is worth more as a rental than as a condo.”
Yes. This is why they’ve been building apartment after apartment after apartment. Rents were going up, up, up. Record highs for Class A in Chicago. But that is going to change now that there are thousands. Of course, they’re overbuilding.
Gary- they’ve built these apartment buildings at record per-unit prices. They would have to sell them for record condo prices in order to make a dime off the deal. Maybe demand will be there, I don’t know. But I kind of doubt with mortgage rates on the rise that more people will be able to buy at the higher prices. But maybe they’ll all be getting wage increases too.
“First, if you bought a condo 10 years ago for $400K, put $50k into it and it’s now worth $450K in my book that’s 0 appreciation.”
If you put $50,000 into a condo at that price point then it’s new appliances and new bathrooms (at the minimum.)
At the prices I’ve seen in the GZ, you’re getting a LOT more than $50,000 appreciation if you put in new bathrooms and spruce up the kitchen. Should be selling for $500,000 to $600,000 (depending on size, location etc. obviously.)
Sorry all the people you know, Gary, have bought in crap buildings with no appreciation. But that’s NOT the reality out there. Look around. Prices are SOARING. 2/2s are routinely in the upper $500,000s and $600,000s in older downtown high rises now. Lol.
But if you want to keep believing that everything sucks in the GZ, then go ahead.
You get out of a property what you put into it. No one has ever said you can buy, do nothing for 10 to 20 years, and expect it to soar (unless you live in California- then okay.) But here in Chicago? Not the reality. Owning a property is expensive. There is overhead. But if you keep your property updated and maintained you’ll be fine when you go to sell.
Prices are WELL past peak now in the GZ.
“Sorry all the people you know, Gary, have bought in crap buildings with no appreciation. But that’s NOT the reality out there. Look around. Prices are SOARING. 2/2s are routinely in the upper $500,000s and $600,000s in older downtown high rises now. Lol.”
Please show me specific examples of condos in Lake View. Every time we have this debate I go to the MLS and I randomly pull sales from the last few months (and these are not people I know) and I see the same thing: condos that sold close to or below their prices from the bubble years. Now maybe you think these are all crap buildings because they have < 20 units but that's the bulk of the Lake View market. Maybe you're only looking downtown.
“Really? Then where’d the 20 people come from? Why are there bidding wars for these properties? Why are they going under contract within days at this price point (which is similar or cheaper than renting)?”
Well, there is an inventory shortage and then some realtors are underpricing properties. I don’t know if they aren’t sure what the prices should be or if they are intentionally doing it for a quick commission. Sure…if you underprice a property you will get run over by buyers.
And we don’t currently have excess housing stock but with all the planned construction we could have it once they deliver on all the construction.
Here is my February update: http://www.chicagonow.com/getting-real/2017/03/chicago-real-estate-market-update-february-another-disappointing-month/
Sales not so hot. Lately we have been bouncing from a strong month to a weak month. But inventories continue to drop – except for single family home inventory in much of the green zone.
“single family home inventory in much of the green zone”
SFH inventory over ~$1.3m. Seems to be about 3x as much inventory in the higher priced segment, compared to the “affordable” GZ-SFH.