Market Conditions: Sales Up 7.5% YOY in Chicago in October As Median Price Soars
Finally, the Illinois Association of Realtors is out with the October sales data.
From the Illinois Association of Realtors:
The city of Chicago saw a 7.5 percent year-over-year home sales increase in October 2013 with 2,231 sales, up from 2,076 in October 2012.
The city of Chicago continues to see a steady market increase in median home pricing to $218,500 in October 2013 versus $175,000 in October 2012, a 24.9 percent increase, year over year.
Here’s the October data going all the way back to 1997 (thanks to G):
October Chicago sfh/condo/th sales and median
1997 1,731 $129,900
1998 1,855 $138,000
1999 1,978 $159,500
2000 2,106 $174,710
2001 2,177 $200,000
2002 2,503 $215,000
2003 2,996 $236,000
2004 2,651 $241,000
2005 2,846 $268,500
2006 2,630 $278,000
2007 2,007 $285,000
2008 1,564 $261,000
2009 2,068 $215,000
2010 1,225 $183,000
2011 1,324 $162,000 (44% short/REO sales)
2012 2,009 $175,000
2013: 2,231 $218,500
“Lower inventory options continue to raise pricing in the city as motivated, qualified buyers look to make their move as lower interest rates afford more value for their investment,” said Matt Farrell, president of the Chicago Association of REALTORS® and managing partner of Urban Real Estate.
“As the market continues to correct itself, buyers will appreciate increased value on their long-term investment. Absorption of distressed properties being rehabbed and resold will also continue to add value to the communities they are in,” Farrell added.
Chicago mirrored what was happening in other big metro areas in October (and nationally as well) as sales were up year over year but slowed compared to the gains in the spring and summer.
The expert the IAR uses every month blamed the slowdown on the government shutdown.
“While the partial government shutdown has certainly had a profound negative effect on the housing market’s continuing recovery, sales and prices are forecast to return to more robust growth rates over the next three months,” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois.
“The declines in consumer sentiment suggest that a longer-term resolution to the government fiscal tensions would provide conditions that would significantly help the housing market.”
While, the National Association of Realtors’ in-house economist blamed affordability.
Lawrence Yun, NAR chief economist, said a flattening trend is expected. “The erosion in buying power is dampening home sales,” he said. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”
The FOMC said in its October meeting minutes that the taper on bond buying will likely be happening at the next several meetings. The bond market reacted immediately by pushing up yields on the 10-year.
If mortgage rates start to rise again, what does that mean for sales over the next few months?
Can there be both rising home prices AND rising mortgage rates?
Illinois home sales increase 3.7 percent, median prices rise 13.8 percent in October [Illinois Association of Realtors, Press Release, November 20, 2013]
October Existing-Home Sales Cool but Low Inventory Drives Prices [National Association of Realtors, Press Release, November 20, 2013]
The 10-year continues to trend higher, at 2.82% this morning. Mortgage rates are the wild card. Will the Fed allow them to rise to 5% again? What’s the Fed’s threshold of pain? 5.25%? 5.5%?
If the Fed doesn’t taper in December, then it will certainly be priced in by the bond market for the March meeting (meaning the bond market will already be at that level well ahead of time.) Just in time for the spring buying season.
Yellen is another uber dove, rates on 30 year fixeds will remain historically low (5% or less) under her tenure. I scout redfin a few times a week and places I plan on looking at seem to go under contract in 2 weeks or less, the most recent one was just one week! This market isn’t healthy right now, we need more inventory!
“places I plan on looking at seem to go under contract in 2 weeks or less, the most recent one was just one week! This market isn’t healthy right now, we need more inventory!”
Sounds like a real healthy market to me. What’s not healthy is that agents are underpricing properties.
“What’s not healthy is that agents are underpricing properties.”
Are they? I’m actually seeing mostly outrageous prices. But maybe that’s the stuff that isn’t selling in a week. If it’s priced correctly it’s selling quickly.
I don’t think it can take higher prices. Why am I paying $650,000 for a 2/2 in the Silver in River North? That is absurd.
“Yellen is another uber dove, rates on 30 year fixeds will remain historically low (5% or less) under her tenure.”
So you’re saying that the Fed will NOT taper within the next 4 years. That it will put another $4 trillion on its balance sheet.
Without the Fed bond buying, the 10-year would be around 4% to 4.25%. That would put mortgage rates around 6%. When the Fed starts to taper (IF they do- since you think they will not do so)- then the 10-year will react and start to move higher. The taper will probably take a year or so anyway but the bond market will react pretty quickly to the change (as if the taper happened in a month or two.)
My buddy is looking for a house in the burbs in the $300’s range and while there are a house of homes for sale, most are listed aggressively. For example if the average psf is $175 then every home on the mls not under k is listed at $250 psf. Put another way instead of getting a 1,700 sq foot home for $300,000 – which is the going rate for some ‘burbs, all that is for sale are 1,200 sq foot splits or ranches for $300,0000 so they just sit unsold. The homes that list at the median ppsf rate go under contract in a week. Gary calls this underpriced. I call it pricing appropriately.
They will probably stop buying bonds in late 2015, but rates will remain near zero and they will keep reinvesting (whats the interest on 4 trillion not to mention the early redeptions lol)… even if they taper, who cares, they are still buying a shitload of bonds… and are still reinvesting the proceeds from previously bought bonds (i.e. the 85bil of stimulus is actually 120 billion due to reinvestment) and just because they aren’t buying bonds in say 2-3 years, doesn’t mean they are going to stop stimulating with zero rates.
They will probably stop buying bonds in late 2015, but rates will remain near zero and they will keep reinvesting (whats the interest on 4 trillion not to mention the early redeptions lol)… even if they taper, who cares, they are still buying a shitload of bonds… and are still reinvesting the proceeds from previously bought bonds (i.e. the 85bil of stimulus is actually 120 billion due to reinvestment) and just because they aren’t buying bonds in say 2-3 years, doesn’t mean they are going to stop stimulating with zero rates.
“Without the Fed bond buying, the 10-year would be around 4% to 4.25%. ”
That is not true at all, the 10 year has been below 4% for decades at a time before without bond buying… 1877-1917 (40 year period), 1934-1957 (23 year period), and of course 2007-?
Didn’t the Fed just announce that it was going to start the taper soon – like in the next few months?
“Didn’t the Fed just announce that it was going to start the taper soon – like in the next few months?”
No. The FOMC minutes revealed that many members WANT to start the taper in the next few months, depending on the data, of course.
Data, data, data.
Several Fed members have said that they want to see consistent job gains of 200,000 a month. Through October, the average has been 194,000. If November is over 200,000 then it’s conceivable (depending on other data) that they could begin to taper in December. But most people think it will be March (the January meeting has no press conference attached to it.)
What gets me is that many FOMC members said, after the violent reaction of the bond market over the summer to possible September taper that they didn’t think “the bond market would react like that.” What did they think it would do?
“They will probably stop buying bonds in late 2015, but rates will remain near zero and they will keep reinvesting (whats the interest on 4 trillion not to mention the early redeptions lol)… even if they taper, who cares, they are still buying a shitload of bonds.”
Bernanke already outlined the timeline. He said it would take a year from the time they started tapering (give or take a few months.) The end of 2015 would be 2 years. But Benanke is now “out” so who knows what Yellen will decide? Maybe we will get QE for forever and she will leave with a mega legacy of debt on her hands and huge bubbles in all the asset classes? Or maybe we will take our medicine now, see a decline in the stock market, the art market and the housing market, and get back on track to a “normal” economy (whatever the heck that is.)
Everyone realizes we’re still in an “emergency” situation, right? That this kind of QE has never been done before in the United States? That it is only done under the most dire of circumstances?
“Maybe we will get QE for forever and she will leave with a mega legacy of debt on her hands and huge bubbles in all the asset classes? Or maybe we will take our medicine now, see a decline in the stock market, the art market and the housing market, and get back on track to a “normal” economy (whatever the heck that is.)”
Gosh, I wonder which one they will choose?!?!?
lol chuk, my thoughts exactly
“Maybe we will get QE for forever and she will leave with a mega legacy of debt on her hands and huge bubbles in all the asset classes? Or maybe we will take our medicine now, see a decline in the stock market, the art market and the housing market, and get back on track to a “normal” economy (whatever the heck that is.)”
“Gosh, I wonder which one they will choose?!?!?”
Depends on who is on the FOMC right?
Or perhaps you haven’t read Philly Fed President Plosser’s excellent paper (presented last week) called “A Limited Central Bank” or heard him talk about how September was a missed opportunity for the Fed to begin taper.
He is not a sitting member this year on the FOMC. Not sure if he will be next year (as it alternates.) But there clearly ARE adults in the room.
“He is not a sitting member this year on the FOMC. Not sure if he will be next year (as it alternates.) But there clearly ARE adults in the room.”
Except he ISN’T in the room.
btw, do you REALLY think that the ANY of the people on the FOMC don’t know what the “right” thing is to do? However, knowing it, and actually doing it are 2 completely different things.
“He is not a sitting member this year on the FOMC. ”
so who the fuck cares what he has to say? Local fed chairs from all over the country have been saying what he’s been saying for the last 5 years, does it matter? Nope!
“Local fed chairs from all over the country have been saying what he’s been saying for the last 5 years, does it matter? Nope!”
Um…no they haven’t. Some of the others have been going the other way. Maybe they will win out. I point out his new paper because there IS an adult in the room.
I don’t know if he’ll be a sitting member next year. They ALL listen to each other. They’re academics. It’s what they do. They write papers and talk about it. He’s an alternate (not sure if they attend the meetings anyway.) He issued a 90 page paper sonies.
Please try and understand how the Fed works.