Chicago Housing Bubble

This Month in Real Estate - April

I said it last month and I'll say it again - this piece is a little watered down, but it gives a snapshot of some numbers from the US housing market. It's nicely done and a good "once over" of things.

Chicago price index down 17.6% since February 2008

Wow! I was working on a 15-year historical look at the Case Schiller report last night. I didn't finish it and went to pick it up this morning and WHAM! New data!

The Trib wrote the story for me about Chicago. Here it is. Chicago is down 17.6% since February 2008.

The "good" news? For the first time in 16 months, the index has *not* set a record for a decline. As President Bush would say: "Mission Accomplished!"

2009 projections through 04/15

After I saw how the numbers were looking through February and then March, I decided I should be tracking the market every 15 days. I've decided I'm now going to watch the following neighborhoods as my definition of the "Chicago northside":

• Albany Park
• Irving Park
• Edgewater
• Uptown
• Lakeview
• Lincoln Park
• Near North (Gold Coast, Streeterville, Old Town, River North)
• Logan Square
• Bucktown/Wicker Park

As projections go, I'm only going to watch supply/demand. But as prices change I'll be posting that information as well. I'll also break out individual neighborhoods in followup posts.

Onto the numbers...

Here we can see that the numbers have not changed since I ran the exact projections back in mid-March. The results are the same - 1 in 5 condos that get listed will sell this year.

Here it is graphically (because I just learned how to make graphs in Excel and I'm sure someone reading this wants pretty pictures instead of boring data sheets):

Less than a 3rd of what sold in 2005 will sell in 2009!

The moral of the story remains the same... if you're overpriced, you will not sell. At all. Get over it or get in line with pricing. How do you know if you're overpriced? Based on the study I did last month, you're overpriced if you haven't sold in 56 days.

More projections in 15 days...

"Fear makes the wolf bigger than he is"

I've been running around selling real estate like a crazy man for the past few weeks. So going to training for a few days feels like a vacation. I can just relax, and focus on learning. And at the end of the day, back at the hotel, I can take advantage of a few of my favorite pastimes:

• being quiet
• not talking
• falling asleep at my leisure
• watching bad movies
• over-eating take out
• not cleaning up after myself

During one of these very-classy evenings last week, I was laying in bed, eating a canoli (which was surprisingly good for a take-out canoli), and watching CNN. And I caught Donald Trump on Larry King. He was pimping his new book "Think Like A Champion" (which I may pick up).

Trump was also talking about the real estate market and trying to impress on people that now is an excellent time to buy. I couldn't find a video of it to share. But here's an interview The Street did with the big guy where he says many of the same things.

Say what you want about Trump (obnoxious, self-obsessed, bad hair), but the guy knows how to build some beautiful buildings.

UPDATE: The link wasn't working(!) We're OK now.

5 risky places to be a homeowner

Forbes.com wrote another annoying list of places where it sucks to be you. Thankfully Chicago is nowhere to be found.

Riskiest Places for U.S. Homeowners

"But I live in Lincoln Park/Lakeview - it's not that bad there"

If you think you're immune from these market pressures because you live in Lakeview or Lincoln Park, I hate to tell you this - you're wrong. Here's the numbers broken out separately from yesterday's numbers.

2009 Projections through March

Now that we're far enough into April, I feel safe using the March closing numbers and doing some projections. Bottom line - not a big difference from what I projected in February...

NOTE: 2005-2008 are actuals. 2009 are projected totals.

(Northside: Albany Park, Irving Park, Uptown, Edgewater, Lakeview, Lincoln Park, Near North, Logan Square, Lincoln Square, North Center, Bucktown/Wicker Park.)

Demand still sits at more than 50% down from last year. That's true when you look at the first 3 months of the year and it's true when you project that out for the remainder of the year.

In the post from last week about 2005 prices vs. today, JMB asked a question about why we're not seeing sellers drop their prices yet. I don't have an answer for that one. But it doesn't take a degree in economics to answer *this* question:

What happens to prices when demand drops by more than 50% in a year?

Here's at least part of the answer:

Prices are already below 2005 prices. Newsflash - if you bought in 2005, you've lost money. If you don't believe that, you're in denial.

"I bought my place in 2005 - what's it worth now?"

The numbers are still coming in from the end of March's closings on the north side. And I'm working to get them all compiled correctly. I expect by Wednesday I'll have them up.

Meanwhile, I'm also looking at prices. And since 2005 was the peak year in real estate, it makes sense to look at the prices so far for this year and see how they compare to the median prices in 2005. As usual, I used 2 bed, 2 bath condos (the "bread and butter" if you will).

Shorts sales - how much do you save?

In my post from yesterday I wondered what the price difference is on units that are shorts sales vs. non-short sales. As I was digging in, I realized there aren't enough short sales in the market to get good data. But I did do a quick analysis anyway. Here's what I found:

Short sales by the numbers (Chicago north side, condos):

• 3.84% = percentage of short sales listed
• 5.40% = percentage of total sales since 01/01/2009 that are short sales
• $226,250 = median price of non-short sale 1-bedroom on the north side
• $224,500 = median price of short sale 1-bedroom on the north side

To conclude:

1. Short sales represent about 1 in 20 sales
2. Short sales represent about 1 in 25 listings
3. You can save about 1% if you buy a short sale

Back to our regularly scheduled analysis...