Market Conditions: Market Times Skyrocketing
The Chicago Tribune had some interesting housing data in the Sunday Home section.
There was this gloomy statement from Diane Swonk, chief economist at Chicago-based Mesirow Financial, on the housing outlook:
“Sales and starts activity should bottom out before the end of 2009, that’s if we can get the lending apparatus moving again. But the downward pressure on home prices will take much longer, well into 2010, if not the end of 2010 as the credit crunch continues.”
Data from Midwest Real Estate Data LLC also shows that market times are soaring for condos and single family homes in Chicago.
As of October 27, average market time is up to 139 days (for both condos and SFH combined). Compare that with 2000 where it looks to be about 20 days or so and even 2005 where it was about 90 days.
Prices, however, appear to only be leveling off. Median selling price was about $150,000 in 2000 compared to $295,000 as of October 27.
Home Finance Toolkit Section by Suzanne Cosgrove [Chicago Tribune, Nov 2, 2008]
Does that 139 day # factor in the homes that are delisted and then relisted?
I can’t tell you how many houses I’ve tracked that are on the market for 120 days, for example, then taken off and relisted and are on for antoehr 120 or so.
Just wait, the housing mess will continue for much longer if Obama is elected (McCain will have his challenges too) since (1) higher taxes means less income for housing for first time owners and those who want to move up and (2) layoffs will accelerate if he is elected since employers will not be able to absorb the added costs of each employee under democratic polcies….if a 10% increase in costs by govt on each employee, then 10% will have to get fired and each remaining worker will need to take up that 10% slack. Simple economics……
John,
You place entirely too much faith in the cause and effect of our policy makers and their implications for the local real estate market. This is a real estate blog John. There are a plethora of political blogs where your commentary will make more sense and might actually be listened to by people. Here its rather a sideshow.
So median prices doubled in the analyzed timeframe. What did median incomes do?
You see John it doesn’t matter who wins tomorrow, nothing, nobody nor any policy can stop the continuing real estate price collapse.
150k for a place is downright affordable for someone like me (and my income is higher than the median worker), 300k is quite a stretch on my budget. The Chicago real estate market is poised to crater: the ‘median’ person cannot realistically afford the median house.
John – please post your political rants on fauxnews. Your comments add nothing to the discussion on the Chicago real estate market. If I cared enough, I could come up with 2 reasons why McCain will suck when it comes to housing. the point is; of course anyone can find statistics to prove their side so your 2 random “simple economics” pointers add nothing of value to someone on this board.
John, do you really think first time buyers make more than $250,000. Can you show me exact proof that anyone making under a quarter of a million dollars will get a tax increase?
Take your rumors elsewhere, everyone here is far too educated to learn political facts from whispers around the internet.
The rants don’t bother me. Almost 50% of the country is voting against Obama and it’s nice to hear a different view point from a Chicago centered website.
As a side note unrelated to politics, the real estate market is in a depression it will be long and painful. There are few solvent lenders chasing even fewer qualified buyers. The depressed sales volume is leading to lower home prices. As prices lower, everyone loses paper equity and some even go underwater. Factor in taxes, credit cards, mortgage deficiencies, etc, we’re not going to get out of this mess until literally tens of millions of people have filed bankruptcy and washed the bad debt out of the system. Then with a fresh start they can tighten the belt, try and save money and adjust to our new economic realities.
a,
$250,000 went to $200,000 and Biden himself said a few days ago it’s actually more like $150,000…..(Joe Biden caused headaches for the campaign last Monday when he told a Scranton, Pa., TV station that Obama’s tax break “should go to middle class people — people making under $150,000 a year.”)
and my household makes between $150,000 and $200,000 and I’m a first time homebuyer. I’m already phased out of the student loan deduction, I’m in a higher tax bracket, I pay far more taxes than the guy with a house and 3 kids and I’m penalized for not having 3 children and a monster of a mortgage….argh, don’t get me started on this…….it’s monday morning….don’t take the bait………I have a ton of work to do!!!
Since we are on this tangent, the thing that bothers me is that the government is almost certainly going to throw a bunch of money to try to prop the housing market up and keep people from foreclosure. I think Obama and McCain would both do this. Leaving aside fairness considerations, the main problem is that it just won’t work but we may put a lot of taxpayer money into this.
Housing prices must decline significantly (in real terms) to reach equilibrium. The gov’t can’t prevent this but it can waste money delaying it. The longer the delay, the worse the effect. If we reached the market price, people would be buying and selling homes again. Not at the bubble levels but at normal levels, which would be better than the current stalemate.
DZ,
I strongly suspect the government is going to try to inflate our way out of this mess. It would stabilize the financial system as well as devalue our massive government debt and I see them going this route. Look for CPI targetting in the coming years as the government focus on an inflation rate of 4-7%. Unfortunately this could make things more worse longer term as I don’t see wages keeping up with these inflation figures. Fed funds will be at 0% soon and I predict they will stay there a long time.
Inflation hawks will be relegated to voicing their dissent but will largely be ignored and the printing pressess will continue to run at full speed ahead cranking out pallets of $100 bills.
High inflation, default or war are the only ways out of our debt. I think we’re at the point where its too much money to repay.
Bob, I agree with the inflation possibility. I still think they are going to waste a lot of money trying to prevent the unpreventable. But, hey, at least that cost will be reduced by inflation.
DZ,
Yeah, but we’ll all have to renegotiate our salaries to keep up…or keep bouncing around to a new job.
Why the hate on politics? We have an election tomorrow that will impact residential real estate. Do you not care how much gain will be shielded(or not for that matter) under each candidates tax plan? How about job creation, which will impact demand? The TARP and its impact on the lending market, which will impact construction?
Click on my name for link to a Market Watch audio file. We have a real estate depression going on folks (residential, soon retail, then commercial to follow). Auto sales have absolutely tanked and is in a depression. The consumer is tapped out into the negative and all those future sales that were pulled into the present via debt (the biggie was homes used as an ATM as a second “income” which was all for discretionary spending) will obliterate current demand. This is serious stuff people. U.S. unemployment will be 8% next year which is merely a weigh station to 10% later.
Its not surprising. Think of all the fake economic growth created during the period of 2001-2008 that occured due to the real estate ponzi scheme. This was essentially borrowing from future GDP which is what happened. Now that the bubble is over all this fake growth has to be purged from the system.
It will be the ‘anti-wealth effect’ in the sense that people will pare back on consumer spending now that they realize their house is worth less.
I agree with John, we are in a real estate depression and I’ve been saying that for months. And I’m merely quoting Bob Toll of Toll Brothers. It will be nearly impossible for sales, and likewise, mortgage originations, to reach 2005/2006 levels. The mortgage banks and wholesalers that set up the loans no longer exist. No other service has stepped in to fill its place. The only banks lending have prudent lending standards, or, are FHA. New Century and IndyMac and Countrywide aren’t going to make a comeback anytime soon.
There is no easy solution to the problem. there is a ton of inventory out there seeking fewer and fewer qualified buyers. Loan mods might be the way to go but that’s expensive and pisses off a lot of people who actually pay thier mortgage. Foreclosures are the natural process but that decimates neighborhoods and families. The market, for the most part, has taken care of the bad banks. They’ve been bought up, merged, BK, etc. The market now has to take care of the toxic waste that was their spawn and again, there is no easy answer.
Personally, at the bottom of this mess, homes will be affordable and plentiful.
1. The consumer is kaput. Wages have flat out not kept up with house prices. A great deal of the recent prosperity was paid for from extractions of phantom equity.
2. The gov’t can only keep spinning the situation in a desperate effort to coax out the last real money leftover in the system.
Don’t be the fall guy, let someone else take the hit for you as prices inexorably drift back to their historical mean.