Market Conditions: Was Tight Inventory the Reason Sales Fell 4% in February YOY?
The Illinois Association of Realtors is out with the February 2017 home sales.
Tight inventory has been an issue at price points under $1 million.
According to the IAR, home sales fell year over year even with the best winter weather ever.
The city of Chicago saw a 4.0 percent year-over-year home sales decrease in February 2017 with 1,505 sales, down from 1,567 in February 2016. The median price of a home in the city of Chicago in February 2017 was $246,000, up 4.2 percent compared to February 2016 when it was $236,000.
Remember, February home sales usually went under contract in December and January.
Here is the sales data for February going back to 1997 (courtesy of G). It is slightly different from the IAR’s data:
- 1997: 881 sales
- 1998: 991
- 2000: 1383
- 2001: 1151
- 2002: 1677
- 2003: 1566
- 2004: 1814
- 2005: 2228
- 2006: 1855
- 2007: 1703
- 2008: 1454
- 2009: 870
- 2010: 1257
- 2011: 1092
- 2012: 1250
- 2013: 1411
- 2014: 1361
- 2015: 1497
- 2016: 1567
- 2017: 1505
Here is the Median Price Data also going back to 1997 (thanks G!):
- 1997: $117,000
- 1998: $132,000
- 1999: $143,750
- 2000: $161,500
- 2001: $180,200
- 2002: $212,000
- 2003: $215,000
- 2004: $229,900
- 2005: $268,900
- 2006: $267,500
- 2007: $270,000
- 2008: $290,000
- 2009: $218,125 (with 31% being REO/Short Sales)
- 2010: $176,000 (with 46% being REO/Short Sales)
- 2011: $150,250 (with 50% being REO/Short Sales)
- 2012: $140,300 (with 52% being REO/Short Sales)
- 2013: $158,000
- 2014 $175,000
- 2015: $212,000
- 2016: $236,000
- 2017: $246,000
Strangely enough, last year, we were complaining about the tight inventory impacting sales as well. This is the second year in a row when it has been difficult to buy.
“We’re in an active home sales environment,” said Matt Silver, president of the Chicago Association of REALTORS® and partner at Urban Real Estate. “We are seeing listings offered in advance of the spring market, with condos, in particular, benefitting from increased consumer confidence. The recent announcement of a rate hike, plus the hot stock market and higher wages, heralds an increase in home prices and a rapid decline in market time in the months to come.”
Statewide, market times continued to sink to 74 days from 81 days a year ago.
The average 30-year mortgage rate was 4.17% in February, up from 3.66% in February 2016.
“Prices continue to move in a positive direction,” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. “While consumer confidence reflects optimism about the economy, the housing inventory continues to shrink suggesting that while more optimistic, many homeowners are not yet tempted enough to consider moving to a larger or more expensive home.”
If inventory remains this tight in the spring market, what will buyers do?
Illinois home prices increase in February; sales lower amid tight inventory [Illinois Association of Realtors, Press Release, March 22, 2017]
You have to look at the moving average because there are a lot of month to month variations. Remember that January had the highest sales in 10 years. But the overall pattern is that sales have been gradually increasing for the last 3 years – nothing to write home about. The moving average is up around 2% from a year ago.
And of course it’s inventory related. There has been a lot of talk about housing market gridlock: people can’t sell because there’s nothing to buy and if they don’t sell….
I’m hopeful that Chicago will start to see better price appreciation in the segments that have tight inventory. Pricing cures supply problems and it certainly helps with the new construction.
The steady climb of prices is amazing. Good for homeowners looking to sell but bad for everyone looking to buy. And they’ve come out to buy. They’re qualifying buyers who have a credit score of 601+, a steady job and a down payment equal to an earned income credit (EIC) federal tax refund. previous foreclosures, no problem! bankruptcy on your credit report, no problem! judgments and charge offs, no problem! A lot of sales these days, at least on the below median pricing, are to people who have no business returning to home ownership. Another recession is inevitable, and when the next round of layoffs come, or the overtime is cut back, these new homeowners with less than $1,000 in their bank account will all redefault. Then throw in the millions of people with 40 year loan mods with balloons, and it’s another foreclosure crisis, albeit it of a much smaller scale than the previous one. If I had to make a prediction, I’d guess 2018/2019 SHTF, just in time for the 2020 election.
how does the supposed migration of people out of Chicago and Illinois factor into all of this?
“how does the supposed migration of people out of Chicago and Illinois factor into all of this?”
Many immigrants to IL are of the higher earning demographics which explains an ever expanding wealth northern/western half of the metro area while the southern portions of the metro area are deteriorating. Many in the south have abandoned IL altogether and moved over the border to indiana.
Look at the numbers Icarus. House prices are increasing. The metro area is estimated to have lost about 0.22% of it’s population. And it’s likely many are simply old timers who keep a home here but list Florida and Arizona as primary residence.
“. And it’s likely many are simply old timers who keep a home here but list Florida and Arizona as primary residence.
Uh no. Got a text from a friend this week who got a job offer in the sunbelt. He’s gonna take it too. not the first of my friends to leave Chicago for greener pastures. and I’m just some random guy. The Trib had an article a few months ago by some author who lamented that nearly all of her friends and co-workers had left Chicago. It’s real, it’s happening, and you should pay attention.
Yet Chicago home prices are rising, office occupancy and rents are at record levels, apartment rents are increasing and apartment vacancy is low.
I’m glad your friends found what they are looking for. We have had a bunch of retirees pass away in our neighborhood, new comers are architects, attorney’s, techies, finance workers with high incomes. The old timers were on SSI. The new people are from LA, Singapore, NY, DC.
Get out of your suburban nightmare already.
“We have had a bunch of retirees pass away in our neighborhood, new comers are architects, attorney’s, techies, finance workers with high incomes.
Your block is a microcosm of what’s happening in the greater chicago area. the population is shrinking and the newcomers are mostly upper middle class and upper class residents (or college grads who will soon be that way). the old guy next door to me died and in moved a banker who has rehabbed the entire house. The guy next on the otherside of me is about to die and his house will go to a young couple with more than $100k+ in income.
And this is preferable only if you’re a racist and classist. But for the rest of us regular folk, it’s awful as we watch the middle class disappear, and the divide between the rich and the poor grow exponentially.
“But for the rest of us regular folk, it’s awful as we watch the middle class disappear, and the divide between the rich and the poor grow exponentially.”
The middle class isn’t “disappearing.” You just can’t live in Park Ridge if you’re middle class. But you can live in Flossmoor or Beverly. You can live in Orland Park. You can live in Lemont or Woodridge. You can live in Bartlett.
It’s a little dramatic, don’t you think, HD, to say the middle class is priced out of the entire Chicagoland area? This isn’t the Bay Area.
“this is preferable only if you’re a racist”
That’s a helluva lot more “racist” than thinking that having a growing professional-class population is a good thing.
check this out: http://chicagoist.com/2017/03/27/in_crane_sight.php
Chicago has 56 active cranes, with 31 of those currently building residential construction, according to the Wall Street Journal. The “crane tally,” compiled late last year and published last week, found Seattle in second place (23 residential cranes). Chicago more than tripled the third-place city, Denver, which sports 10 residential cranes in operation.
“Chicago has 56 active cranes, with 31 of those currently building residential construction, according to the Wall Street Journal.”
Yes HH. I’ve been saying for a LONG time on this very site that we have 44 cranes (and now it’s up to 56.) Yay for us.
But I thought the city was going to hell? I thought it was worse than the Middle East?
I guess someone forgot to tell the world’s greatest developers, architects and big corporations which keep moving here.
The middle class is disappearing because so many of them are moving into the upper middle class.
Chicago is way behind new York in the # of cranes though, its bizarre why they keep leaving out that fact
“The middle class is disappearing because so many of them are moving into the upper middle class.”
And the rest slipping into the abyss of the lower middle class …
“Chicago is way behind new York in the # of cranes though”
Source, please.
All those articles rely on what is considered the definitive source:
http://assets.rlb.com/production/2017/02/01000131/2017-01-Crane-Index.pdf
“Of the cities measured, Toronto, Seattle, and Chicago take the lead in North America, making up 48% of cranes. ”
And yes, NYC is one of the cities measured.
hd posted “And the rest slipping into the abyss of the lower middle class …” after “…his house will go to a young couple with more than $100k+ in income. And this is preferable only if you’re a racist and classist. But for the rest of us regular folk, it’s awful as we watch the middle class disappear …”
hd: Are u ok w/investor buying sfh next door & renting to Section 8 tenants so working class family gets exposure to middle class values/lifestyle in safe surroundings?
Mike HG on March 31st, 2017 at 9:50 am
The middle class is disappearing because so many of them are moving into the upper middle class.”
This is correct.
http://marginalrevolution.com/marginalrevolution/2016/06/the-middle-class-is-shrinking-because-many-people-are-getting-richer.html
“hd: Are u ok w/investor buying sfh next door & renting to Section 8 tenants so working class family gets exposure to middle class values/lifestyle in safe surroundings?”
sure, as long as I was the investor…
but see the following for a contrasting view:
http://www.pewsocialtrends.org/2015/12/09/the-american-middle-class-is-losing-ground/
“Based on the definition used in this report, the share of American adults living in middle-income households has fallen from 61% in 1971 to 50% in 2015. The share living in the upper-income tier rose from 14% to 21% over the same period. Meanwhile, the share in the lower-income tier increased from 25% to 29%. Notably, the 7 percentage point increase in the share at the top is nearly double the 4 percentage point increase at the bottom.”
So yes, more people have been getting richer, but half as many have gotten poorer too…
and the rest of the middle class feels poorer, because they are:
“Over the same period, however, the nation’s aggregate household income has substantially shifted from middle-income to upper-income households, driven by the growing size of the upper-income tier and more rapid gains in income at the top. The share accruing to middle-income households was 43% in 2014, down substantially from 62% in 1970.2
And middle-income Americans have fallen further behind financially in the new century. In 2014, the median income of these households was 4% less than in 2000. Moreover, because of the housing market crisis and the Great Recession of 2007-09, their median wealth (assets minus debts) fell by 28% from 2001 to 2013.
Meanwhile, the far edges of the income spectrum have shown the most growth. In 2015, 20% of American adults were in the lowest-income tier, up from 16% in 1971. On the opposite side, 9% are in the highest-income tier, more than double the 4% share in 1971. At the same time, the shares of adults in the lower-middle or upper-middle income tiers were nearly unchanged.”
And the rest slipping into the abyss of the lower middle class …
I think you’re exaggerating a bit, don’t you HD?
Go to the South Suburbs, to Elk Grove Village, Schaumburg, Hoffman Estates etc. All of these areas are solidly middle class.
People’s perceptions of wealth in America get skewed if they spend all of their time in Southport or Park Ridge. I urge you to get in your car and drive to some of the middle class areas. It’s shocking if you never get out of your own bubble.
Now, if you’re in a coastal state with an even higher standard of living, being middle class is nearly impossible. But Chicago, and the Midwest, in general, really doesn’t have that problem.
Just posted my March update: http://www.chicagonow.com/getting-real/2017/04/chicago-real-estate-market-update-march-sales-set-11-year-record/
March set an 11 year record for sales but there is a lot more to the story. Up 17.9% over last year – IAR will report around a 15.2% increase. As I’ve been pointing out the sales comps are swinging wildly from one month to the next and April will probably be down. You have to look at the moving average.
In a good market there are sellers who don’t sell and buyers who don’t buy. They go in and out of the market with no contribution to the sales stats.
I don’t think there are many people like this in the market right now.
“Go to the South Suburbs, to Elk Grove Village, Schaumburg, Hoffman Estates etc. All of these areas are solidly middle class. ”
So are oak lawn, markham, alsip and carpentersville. I drive all over the chicagoland area. I may not drive into the individual subdivisions but I’m around enough to see what’s going on out there.
“March set an 11 year record for sales but there is a lot more to the story. Up 17.9% over last year – IAR will report around a 15.2% increase.”
Thanks Gary. Mild winter (because many of the March closings went under contract in January/February) helped a lot. Plus a sense of urgency that the mortgage rates will continue to rise (although that’s not happening at the moment.)
If you are looking to buy and you like something, you need to put an offer on that day or else you’re going to lose out. I’ve seen many properties in the GZ (other than $1 million and up) go under contract literally in the first 24 hours.
There also seems to be a bit more inventory coming on the market now. So that should help alleviate some of the urgency. But we’ll see.