Market Conditions: November Sales up 69.9% in Chicago; Prices Decline 3.4% YOY
With the original first time home buyers tax credit set to expire at the end of November 2009, it isn’t surprising that sales soared ahead of the deadline (even though the deadline was then extended to April).
Sales were up strongly in Chicago, the Chicagoland 9-county area and statewide compared with a year ago but prices continued to decline.
In the city of Chicago, November total home sales (single-family and condominiums) were up 69.9 percent to 1,859 sales compared to 1,094 homes sold in November 2008. The city of Chicago median price in November 2009 was $215,000 down 3.4 percent compared to $222,500 a year ago in November 2008.
“November’s city transactions point to an increase in the number of units sold over the same period in 2008. The first-time homebuyer tax credit has provided an excellent incentive to help buyers off the fence,” said Genie Birch, president of the Chicago Association of REALTORS® and a broker associate with Koenig & Strey GMAC, Chicago. “We are monitoring the movement of sales as the year closes, continuing to see distressed properties absorbed and the correction of the Chicago marketplace continue.”
The city of Chicago market appears to be struggling to recover more than some other parts of the state. The average price in Chicago is much higher than the statewide average which stood at $155,000 in November 2009.
“Forecasts for December, January and February indicate sales increasing robustly in Illinois and Chicago on an annual basis, but median price movements in Illinois hold the potential for a mild recovery that is not, as yet, evident in the Chicago market,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois.
Adds Hewings: “The economic news has been dominated by the national job numbers; the national economy shed only 11,000 jobs in November, a dramatic decrease in the rate of job decline over the first part of the year and even over the prior three months when job losses had averaged 135,000 a month. Illinois has recorded 23 months of job declines since the recession began in December 2007.”
Despite the big numbers in November, sales year to date are still much lower than 2008.
In the city of Chicago year-to-date January through November 2009 sales were down 10.4 percent to 17,633 homes sold compared to 19,681 homes sold in the same 11-month period in 2008. The year-to-date median price was down 22.9 percent to $225,000 compared to $291,800 in 2008.
Illinois Home Sales Record Major Gains in November from a Year Ago; Sales Up 64.0% Statewide and 71.6% in Chicago Region [Illinois Association of Realtors Press Release, Dec 22, 2009]
Yeah, it’s the tax credit but those numbers really are pretty dramatic. For the Chicago PMSA that’s up over 18% vs. 2007.
I know at least 4 people personally that bought homes in the last month, the mania is back! yay? But at least this time they aren’t buying at insane prices and are people with good credit. Although I do cringe a bit when I hear stories about people buying 3 flats with FHA loans, but hey at least that person admitted he was taking an all or nothing type risk.
It would be interesting to see what would happen to house prices were it not for government intervention in the housing market. The bubble was created by government agencies, from the Fed with its EZ money policies to the FHA, GNMA, FMAC, FNMA, and the HUD. These agencies have bought the crappy loans no lender would otherwise touch, financed extremely marginal people with poor credit, financed homebuilders to build evermore empty subdivisions in the middle of nowhere, and otherwise goosed and supported the housing mania. Now almost every mortgage, about 95%, is one way or the other guaranteed by a government agency, while in 2005 only about 50% were.
If goverment support of the housing market was ended, from Section 8 rental subsidies to FHA loans for 3.5% down to marginally credit-worthy homebuyers, to HUD loans for mega-scaled condo and apartment buildings for which there is no market, were pulled, and Free Market conditions prevailed, housing would drop another 50% in price.
Then again the November 2008 numbers were abysmal due to the stock market crash during the previous month so I hope there would be a large increase.
Homedelete,
Yeah, but it’s up over 18% vs. 2007: http://chicagohousingstats.com – second graph.
I agree Laura, housing prices would probably drop another 50%, but we’d also have a much faster recovery, and may have already recovered and be where the market should be, instead of the old kick the can down the road thing thats going on now.
I can’t believe these socialist idiots in congress and the white house are basically going to ruin the country for decades and nobody seems to care.
This country gets what it deserves, a crooked Chicago machine politician that will rob this country dry.
bon appetit
kick the can was started long b4 the communist took over the US.
You guys are still here talking about the housing crash? Get a job or better yet go buy a condo!
Let’s recap – Lincoln Park has held up better than the rest of the city. Hmmm… who predicted that? The areas with new construction were hurt the most. I think I heard that from someone here as well.
Sales are up and prices are now stable. YOY price declines exaggerated and are heavily influenced by distressed properties. Things are not that bad if you made a smart investment. Those that purchased from 2005 – 2007 are going to take a hit if they have to sell but will be fine if they hold on (not including those dubm enough to over pay for new constrcution). The real people who will be screwed are those that do not lock in sub 5% interest rates on a new purchase. Inflation is coming and rents will be 30% higher in the next 10 years. Those who purchase can lock in their housing costs (the majority of them) for ever.
BTW – The comments made by Laura above were some of the dumbest I have ever heard. FHA loans represented less than 2% of total loans from 2000 – 2007. I think you should replace the word “goverment” with “greedy banks” like countrywide who supplied the other 98% of the loans.
I thought this site had closed down but the same guys are still here talking about the housing problems when don’t even own a property.
That is really funny!!
He’s baaaack! Oh boy….
The bottom must be in and I missed it! Damn it.
Oh wait, home prices have resumed falling as volume increases! Wow, maybe I didn’t miss the bottom after all!
http://www.calculatedriskblog.com/2009/12/house-price-indices-case-shiller-and.html
I am out again guys. Had another blockbuster year despite it only being a 3 qrt year. Have to get to work and make some more people money!
How’s your dog grooming business going Steve?
Steve,
Really missed you and wondered what happened to you. Uhhhh….FHA has been like 36 – 40 % of the market lately. Sounds like more of the same crap that got us into this mess. However, since you haven’t been around you probably missed me calling the bottom here a few months ago.
Hello Gary – Nice call as the market has taken off in the last few months. It will be interesting to see where it heads once interest rates pop and the stimulas is gone but for now all is good. The future will depend on jobs jobs jobs…
I agree that FHA is now a large part of the market and hopefully this will not last. I was commenting on the period of 2000 – 2007 when the housing mess was created. Blaming the goverment for no doc loans from countrywide and option arms from Washington Mutual is a little off the mark. I think we can all agree that more government involvement (via regulation) was needed and not less.
Once the foreclosures dry up (not for another year), and the lending market opens back up for jumbo products, we will see a huge increase in the YOY price comparisons (currently weaited to the lower end of the market). The increase will be as meaningless as today’s decrease but the headlines will none-the-less read prices jump!
Heitman, FHA loans may have been 2% of loans before, but are now something like 20%.
And you are thinking only of FHA. The rest are guaranteed by FNMA, FMAC. or GNMA.
I did not say that 95% of all loans are FHA. I said that 95% of all loans are now guaranteed by one or the other government agency. In 2005, 50% were. Lenders are taking no risk now, and in the absence of securitization of mortgages, there would be no home lending at all to speak of now.
The government is propping up the housing market at tremendous cost to taxpayers, and is diverting capital away from the industries that could give us a more durable recovery, a more diversified economy based on savings and investment, and a sustainable economy driven by the development of the industries we will need in a fuel-short future. Return the money to the taxpayers and that investment will happen, but as long as our political leaders are trying to run the economy, they will try to drive it by building and flipping houses (or by tossing it at our failed, obsolete auto industry), instead of sustainable industries that meet real needs. We don’t need higher house prices or more condo towers or suburban subdivisions.
I could add that it was the willingness of government agencies to buy whatever loans were generated that drove the insane price increases of the last decade. No loan request was turned down- no matter how big the loan was and how unqualified the borrower was, someone would write it, for the paper could be sold to one of these agencies easily.
Add to that the implied government guarantees of bailouts should the need arise. The LTC bailout set a dreadful precedent, and sent the message that the taxpayers could be made to pay for anything. Institutional players felt free to take outrageous risk, secure in the knowledge that while they could keep their profits, they could offload their losses onto the U.S. Treasury.
Take away the government guarantees, including the implied guarantee of tax-funded bailouts should things not work out according to plan, and these loans would never have been written. Financial institutions do not take risks when they know they will have to eat their losses, that simple.
there’s steve, when will we hear from Ze Cariaoke
Why would more government regulation help? Can you name one government official who warned of the housing bubble? Why would we want them to be in charge of things when every action the government took made things worse?
Foreclosures will not ‘dry’ up next year, are you insane? A foreclosure filed today will take almost a year before the owner moves out! It’ll take another 6 months to a year to even be on the market as an REO; Right now mortgage foreclosures are at record highs and as a country there will be 4,000,000 foreclosures filed in 2009, a record! Do you really think foreclosure are just going to disappear in the next 12 months! hahahahha what a barrel of laughs!
Recent data shows that 5.8 million mortgages are delinquent or in some stage of foreclosure.
Delinquencies are projected to peak in mid-2010 and foreclosures are expected to peak at the end of 2010.
My guess is that “strategic defaults” will increase, too. There’s much less stigma attached to walking away from a mortgage that you can darn well afford to pay but would rather not because you have lost so much equity. If Morgan Stanley can just walk away from 5 large commercial properties in San Fran, then why should some buried homeowner continue to pay for a house that’s worth maybe 65% of what she paid for it?
Well folks, you know what it means when your dog groomer starts barking about easy real estate gains, right?
Gary, you might want to check out HD’s link. That CS bottom you like to tout might not actually be the bottom. Not that it ever was for the areas covered on CC anyway.
The Forthcoming Prime Mortgage Meltdown
http://seekingalpha.com/article/179329-the-forthcoming-prime-mortgage-meltdown
Not happening, the government tits will continue to milk money to banks so that they can “earn” their way out of this mess via inflation, carry trading, equity investing, etc.
Those calling for an epic collapse will be waiting a long long time, and you don’t want that to happen anyway.
Define “epic collapse” Sonies. That sounds like a straw man you erected.
We should all want housing prices to fall to sustainable levels. Govt’s attempt to prop up prices will fail and harm us all much more than even a rapid decline to sustainable levels.
I just purchased a couple of 3 flats and have 4 units available for rent this Feb. G, HD, interested in paying down my mortgage for me?
Heitman out!
SH,
Yeah but being a landlord can be a huge pain, my experience was a nightmare.
SH thinks he’s a land baron.
What else can he do but daydream while squeezing those nasty dog anal glands all day?
I just know good cash flows when I see them. Let’s see, I owned 3 properties until 2005 and then sold all and rented for 3 years. I purchased in 2008 my principal residence and now have 2 rental buildings locked in at 4.75% interest rates.
Follow Heitman and you will be a land baron!
That is really it now. I am back on the lamb for good.
Best of luck guys:)
Break’s over. Get that rubber glove back on.
“I am back on the lamb for good.”
Um, it’s on the LAM. Being back on the LAMB (for good no less) is something wholly different. I’m never taking my dogs to your salon!
The Fed did see a large housing problem on the horizon, but under-estimated its size. Alan Greenspan (May 2005), in reference to housing: “Without calling the overall national issue a bubble, its pretty clear that its an unsustainable underlying problem.” Greenspan didn’t believe in pricking bubbles. Unfortunately, the government did play a role in the creation of housing inflation by pressuring lenders to make loans to less qualified borrowers (every president WWII has wanted to claim that home ownership expanded under his administration . . .). Opps.
Steve does seem to be correct, though. Defaults are more highly correlated to unemployment (primary) and future expectations on home value (secondary) – see below WSJ entry. As unemployment stabilizes, so should defaults.
Interestinly, the article lists two ways to minimize foreclosure: 1.) Increase unemployment benifits; and, 2.) Allow more short sales. Short sales will have a strong deleterious effect on the secondary cause of default, but that course of action probably isn’t palatable to the politicians.
http://blogs.wsj.com/developments/2009/05/28/why-do-borrowers-default-hint-not-because-of-high-mortgage-payments/
“back on the lamb for good.”
That’s gonna cost you that grooming job. Lil Bo Peep is on to you.
The other half of the equation is unsustainable debt loads even if the person remains employed. Trust me, just like there are zombie banks, there are zombie consumers tapped out. They have enough money to pay the interest on their debt every month but not enough money to make any meaningful dent in the principal on the credit cards and the IO on the house. At some point there is a triggering factor which sets off a cascade of default, for some people it’s a major car repair, for others it’s a job loss or in some cases, a reduction in hours, or even a reduction in wages. Defaults will continues for at least another 3 or 4 years.
“As unemployment stabilizes, so should defaults.”
What if unemployment stabilizes at current high levels but lower pay?
“I just know good cash flows when I see them. Let’s see, I owned 3 properties until 2005 and then sold all and rented for 3 years. I purchased in 2008 my principal residence and now have 2 rental buildings locked in at 4.75% interest rates.”
Steve H-
How did you get 4.75% on an investment property? Esp. on three flats?
How does he get 4.75% on an investment property? Well he finances them himself of course!
Some house republicans did see housing and fannie mae and freddie macas a problem, but were labeled racists by the likes of Barney Frank, Maxine Waters, Greg Meeks, and Franklin Raimes
video evidence with over 3.4 million views…
http://www.youtube.com/watch?v=_MGT_cSi7Rs&feature=PlayList&p=CD7C3487881EA13C&index=2
G and HD,
I looked at HD’s link. Best I can tell 1) the LoanPerformance HPI seems to track Case Shiller pretty closely and also indicates a bottom a few months ago. Yeah, it’s down recently but still well off the bottom. 2) The methodology seems to be pretty similar to Case Shiller, no?
Sonies,
I know this video. Really burns me. That Maxine Waters is a total idiot. Did you see her grilling the bank CEOs a while back? They did not know what to do with her. She was incoherent. Asked them questions about things that didn’t exist.
Yeah its a good thing Obamas economic advisor is also a freaking idiot… we’re screwed!
The most recent, not seasonally adjusted, unemployment rate for cook county is 10.8% (Oct. 09), while the national rate is 9.4% (Nov. 09). Discouraged workers and under-employed are not counted. Based on what I have read, the “real” or “economic” unemployment rate may be as high as 20%.
http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&tdim=true&q=unemployment+rate+US#met=unemployment_rate&idim=county:CN170310&tdim=true
Gary, yes it tracks it well. One difference is that CS is a 3-month moving average and the HPI is a single month. That means the sharper decline on the HPI will be smoothed out by CS for at least the next month or two. The HPI with foreclosures is the comparable line to CS, which also includes foreclosure (REO) sales. We shall see how the still increasing foreclosures affect your bottom call.
I have a brother-in-law in construction who exhausted his unemployment benefits and will be celebrating his second x-mas in a row without a steady job. He earns money to feed his family by doing side job remodels/rehabs for cash on the cheap. My sister works a part-time job because that’s all she can find.
Neither of them are considered unemployed for the headline U-3 unemployment number.
For every power couple or cash rich family on the sidelines are are just as many (and if not 20x as many) families struggling to put food on the table.
1 in every 4 children in this country is on food stamps. Just think about that for a moment this holiday season.
The thing to follow is employment – people employed. Much more telling than the unemployment percent. You can see the 10 year numbers for the Chicago area on the last graph at the link I posted earlier. We’re lower than we were 10 years ago – yet we have more housing stock than we did 10 years ago. So that’s the major fly in the ointment right now.
I’ve noticed that too, Gary. The housing stock has increased, but the housing units for sale have exploded with all the conversions and teardowns rebuilt with maximum allowable condo units on the lot.
And where exactly are those jobs? Can they get work permits to build roads in the Sahara?
“and go get a job doing something you don’t like and quit whining”
It’s taking forever for the foreclosures to work through the system. Look at some of the recent posts on bank owned properties on this site. Lis pendens have been in early-to-mid 2008 (remember- before Lehmann even went under or the stock market crash). The banks have taken these properties back as long ago as 6 months.
Only now are they relisting them. In most cases it’s at least 18 months from lis pendens until the bank re-lists it.
To me, that means we have a long, long way to go.