Market Conditions: Monthly Home Sales Fall Again as July Declines 5.3%
The Illinois Association of Realtors is out with the July 2019 data and Chicago home sales fell year-over-year again despite much lower mortgage rates.
From the IAR:
The city of Chicago saw year-over-year home sales decrease 5.3 percent with 2,655 sales in July, compared to 2,803 a year ago. The median price of a home in the city of Chicago in July was $306,250 up 0.4 percent compared to July 2018 when it was $305,000.
Here’s the July data since 1997 (thanks, once again, to G for the historic info):
- 1997: 1,694
- 1998: 2,139
- 1999: 2,186
- 2000: 2,013
- 2001: 2,410
- 2002: 2,661
- 2003: 3,105
- 2004: 3,429
- 2005: 3,487
- 2006: 3,088
- 2007: 2,819
- 2008: 2,200
- 2009: 2,040
- 2010: 1,631
- 2011: 1,666
- 2012: 2,088
- 2013: 2,902
- 2014: 2,725
- 2015: 3,082
- 2016: 2,780
- 2017: 2,698
- 2018: 2,803
- 2019: 2,655
“The same trends we’ve been seeing in the market lately continue to persist,” said Tommy Choi, president of the Chicago Association of REALTORS® and broker at Keller Williams Chicago – Lincoln Park. “The market is in a stabilizing period. Days on the market remain low and prices are steady, so inventory is moving and demand is there. We expect this to continue, particularly on the heels of the Federal Reserve’s rate cut.”
Statewide, market times continued to fall:
- 2016: 53 days
- 2017: 47 days
- 2018: 44 days
- 2019: 43 days
Statewide inventory fell 4.2% to 59,600 from 62,218 a year ago.
30-year fixed mortgage rates have plunged year-over-year to 3.77% from 4.53% which are close to the 2016 lows.
It’s surprising that the lower rates aren’t boosting sales.
“The gyrations in the stock market and the constant discussion about the possibility of a recession are likely to affect consumer confidence in the months ahead,” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. “Low interest rates and only modest price increases would normally be expected to boost sales, but there appears to be hesitation stemming from limited supply and the market turmoil.”
With property taxes on the rise, does it just make more sense to rent in one of the nice, new apartment buildings around the city instead of buy?
Illinois home sales post annual gains in July; median prices record increase [Illinois Association of Realtors, Press Release, August 21, 2019]
hilarious how everyone believes the MSM that we are in a recession or whatever… we are nowhere close to negative GDP let a lone for the last 6 months… fuck outta here with that garbage. These retards on TV have been blathering about recessions since what, 2011? Dead cat bounce? lol
Yes a recession will happen eventually, but it isn’t happening right now nor will it before the end of the year even. Fed is being loose with money to keep the run going for now.
Looks like the same old story. If the 30yr goes below 3.75 we may refinance and we haven’t even lived in our property for 2 years.
Maybe Gary could provide some insight but I know 2-3 months ago Freddie Mac put out new rules regarding the very popular Home Possible 5% down loan to now have a $67,000 income cap, which is absurdly low. The effect of this is probably not significant, but I bet the rule change killed some potential transactions as FHA low DP loans are terribly unattractive in comparison.
“With property taxes on the rise, does it just make more sense to rent in one of the nice, new apartment buildings around the city instead of buy?”
My wife and I entertained this idea before we bought as it probably is a better deal in the short term. It’s never been a better time to be a DINK couple renting downtown. Ultimately it was about sacrificing some short term comfort, convenience, & a flashy, instagrammable home for a larger place with a yard and a neighborhood we could grow into. Rent provides great flexibility and value, but the return is always negative 100% unless you’re one of the few who rents way below their means and actually invests the difference consistently.
Recession is the new “R word” from the left since russia and racism don’t seem to be sticking against Trump. The MSM is literally trying to talk ourselves into a recession since it is hard to run against a booming economy.
Housing is expensive. Property taxes are expensive. Great rental options are plentiful. Many condos are severely dated relative to rentals. I think people don’t feel any great rush to buy given the alternatives available right now.
“With property taxes on the rise, does it just make more sense to rent in one of the nice, new apartment buildings around the city instead of buy?”
Renting almost sounds smart right? Wrong! This new assessor Fritz Kagey is really kicking up property taxes on apartment buildings.
https://therealdeal.com/chicago/2019/04/15/tax-assessments-soar-for-evanston-apartment-buildings/
So, once the new taxes take into effect, the landlords will pass it off to the tenants by raising rents and renters will also be paying their “fair share” of property taxes in increased rents too. But there might be a 1-2 year lag time depending on the duration term of the current lease and also when the new taxes take effect.
Only reason to rent is if you expect to be fleeing Illinois soon or if you have a transitory job.
I recieved my kick in the balls aka property tax increase the same day as a a nearly identical unit in my condo building sold. The new assessed value is nearly $50k more than I unsuccessfully tried to sell my unit for last summer. I’m definitely raising rent next year.
“Rent provides great flexibility and value, but the return is always negative 100% unless you’re one of the few who rents way below their means and actually invests the difference consistently.”
That’s not true. Renting is just a different way to pay for housing. How many realtors will tell you that? 🙂 The key benefit of buying is that you lock in the “rent” for the life of your mortgage – except for property tax increases – and you get to do what you want with the place.
Unfortunately, no insight on the new Freddie Mac rules.
” The new assessed value is nearly $50k more than I unsuccessfully tried to sell my unit for last summer. I’m definitely raising rent next year.”
If that other unit sold below the new assessed value then you would have a strong case for appeal.
“So, once the new taxes take into effect, the landlords will pass it off to the tenants by raising rents and renters will also be paying their “fair share” of property taxes in increased rents too. But there might be a 1-2 year lag time depending on the duration term of the current lease and also when the new taxes take effect.”
I think some of the new taxes will find their way to higher rents but I think most of it will be reflected in lower building values.
If rents go up too high then either more people buy or they look elsewhere to rent.
We know from looking at the extreme cases in the south suburbs that high property taxes eventually translate into lower property values across the board. People can only spend so much on housing.
Elliot, the benefit of Home Possible was that you could do 3% down. It also allows community seconds up to 105% CLTV IIRC. Borrowers with 5% down, typically won’t need Home Possible/Home Ready programs.
FHA is bringing back spot-approvals on condos which is much needed, but their max loan amounts are still too low for the Chicago greenzone. FHA got rid of spot condo approvals, so the entire development had to go through their approval process. This all but killed FHA condo financing as most HOAs don’t update their approvals or won’t take the time to get the building approved.
In other bubble news, supposedly there is a recommendation from the CFPB to just get rid of appraisals altogether on loans less than $400k. We are already getting waivers occasionally from Fannie/Freddie automated underwriting systems but not requiring an appraisal on any loan under $400k is insanity.
“In other bubble news, supposedly there is a recommendation from the CFPB to just get rid of appraisals altogether on loans less than $400k. We are already getting waivers occasionally from Fannie/Freddie automated underwriting systems but not requiring an appraisal on any loan under $400k is insanity.”
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What’s the over and under on how long it will take the fraudsters to jack up every house’s value to $400k for “appraised” (such as it is) value?
Property tax increases have no connection to rents in the medium term.
Put it this way if the landlord could have hiked rents before the property tax increase because of a large supply of renter demand then they would have already hiked rents and had higher profits. In the short term prop tax hikes come out of the landlords pocket.
In the medium term since landlords are making less you would expect fewer new apartment buildings which should lead to upward rent. Of course if rent goes to high the renters all leave the city to somewhere without pension problems to pay for.
“So, once the new taxes take into effect, the landlords will pass it off to the tenants by raising rents and renters will also be paying their “fair share” of property taxes in increased rents too. But there might be a 1-2 year lag time depending on the duration term of the current lease and also when the new taxes take effect.”
Class A and Class B rents are already at record highs per square footage. But no one is fleeing yet as occupancy is 95%.
“hilarious how everyone believes the MSM that we are in a recession or whatever”
No one believes we’re in a recession.
Nobody.
Except for the President, who insisted the other day that the Fed must cut 100 basis points at the September meeting.
Is the economy slowing?
Yes.
It also slowed in 2015-2016. Manufacturing went into a recession. It’s likely close to one again. But it’s a small part of the economy now. However, with Germany near a recession and China either in one or headed to one shortly, the question is, can the US be one of the few economic powerhouses that doesn’t go into a recession?
Unlikely.
For a recession to actually BE a recession, you need negative GDP for 2 quarters in a row. We won’t know we’re “in” a recession until it is already over.
What is stunning is that the economy is slowing not even 2 years after the greatest corporate tax cuts in history.
Trade wars don’t help the economy.
A lot of my younger colleagues are worried about a recession coming (one eventually will of course, but when and how severe…?) having never lived through one as an adult. Some Millennials will thrive in one but some will sink. I think that retail and hospitality (construction primarily) are highly overheated right now – warehousing is also booming, but that might be online delivery driven. There is a lot of retail space going begging and there area a fair amount of tenants taking advantage of that.
I wouldn’t worry about Evanston rental property being revalued – their taxes are far higher than Chicago’s and don’t have the tax base or efficiency of scale that the City does.
“No one believes we’re in a recession.
Nobody.”
right except for the 24/7 fear mongering going on…
“We won’t know we’re “in” a recession until it is already over.”
So, your view is that there is no chance for a recession (in our lifetime; not just the next one) lasting more than 6 months? Wanna put some money behind that?
“except for the 24/7 fear mongering”
Isn’t that just an opportunity for you sonies? Doesn’t any active investor want the CW to be contrary to their own views?? You get the contra trend without having to go spoofing on investor chatboards!
“Bull markets die in euphoria”
this has been one of the most hated bull markets in history… /shrug
The yield curve inversion is quite the leading indication, in 5 of the last 7 recessions at least. Recession will start Q1 2021, so it’s still a while again, slower growth until then.
“I wouldn’t worry about Evanston rental property being revalued – their taxes are far higher than Chicago’s and don’t have the tax base or efficiency of scale that the City does.”
True, but the takeaway is the same. That is, it’s likely (due to Fritz’s change in using cap rates differently) that the property tax burden is going to shift somewhat from individual homeowners to large landlords and commercial properties. In Chicago, that will be even at a larger scale, so I expect some major fights by large management companies. But assuming it stays the way it is, it’s probable property tax rates will go down given the total assessed value for the city is going way up after large buildings get reassessed using the new formula. So, individual homeowners will probably pay lower property taxes actually while large scale businesses and management companies should prepare for higher taxes.
“Recession will start Q1 2021, so it’s still a while again, slower growth until then.”
Wow. So certain. Just as the next President is coming into office. Yikes. Will be difficult for him/her.
Out of the last inversions, the quickest a recession happened was 7 months later. But could be as long as nearly 2 years later.
But the tariffs could accelerate the slowdown.
15% tariffs on all toys as of Dec 15? Yikes. Hasbro has already said there’s no way for them to move their manufacturing quickly. It took them 10 years to get China up to speed on all the regulatory requirements to make sure they were manufacturing safe toys (no lead paint etc.)
Here in Chicago, some businesses are already feeling the pressure. US Steel just laid off 150 workers as they idle their plant.
“this has been one of the most hated bull markets in history… /shrug”
Nah. No different than the “hated” bull market in 1995.
But bull markets DO pull everyone in before they end.
Which is why there is no end to the housing and stock rallies. Because investors are cool to both of them. I know some investors whose financial advisors have told them to “get out” of the market and move into cash right now because they think it’s going to crash 30% or more. These are people who don’t need the money for 10 years.
You rarely see that kind of behavior at the top.
Gold on the other hand, now that’s sizzling.
“right except for the 24/7 fear mongering going on…”
Again, I repeat for you Sonies: “no one believes we’re in a recession.”
No one.
They are fear mongering that a recession is COMING. Not that we’re actually IN one.
If we were getting close to being in one, you’d see it in the jobs data. Sure, it’s backward looking, but the number of layoffs would be increasing already. The weekly jobless claims would start climbing and, right now, they’re actually still locked into the 50-year low level.
A few weeks ago, the financial media began breathlessly watching the weekly claims data because it went from below 200,000 to around 230,000. This was it! The start of the changes in the job market!
But it wasn’t. The data promptly fell back under 210,000 and has hovered in that narrow range. So no one is reporting on it anymore.
But even little things, like Lightfoot putting a hiring freeze on in Chicago, can have an impact. Those were 3,000 jobs that otherwise would have been filled.
Posted my August update earlier today. Another slightly down month – 4.0% lower sales than last year – though IAR will report it as a 7.7% decline, which sounds a lot worse. The SFH and condo/ townhome markets continue to have very different dynamics. Overall inventory levels are not that high. http://www.chicagonow.com/getting-real/2019/09/chicago-real-estate-market-update-another-lower-sales-month-in-august/