Chicago Housing Bubble

Wait - what if I haven't sold yet?

As a quick postscript to the post earlier today, I've been asked (in person) the question:

"Well, this is great, but what about people who haven't sold their condos yet?"

If you haven't sold after:

• 29 days or...
• 75 days and a 6.41% price reduction

You've been on the market an average of 153 days (that's 5 months) and counting...

The numbers tell the story. If you haven't sold after 29 days, take a 6.5% price reduction. If another 6 weeks goes by, you need to take a HARD look at your price and be ready to drop significantly to get sold.

The good news? If you haven't sold, you're in the pool with the majority of the market (87% to be exact). And by "good news", I mean that you're OK being in the losing group...

Do price reductions help (in 2009)?

Here we are at the end of month 7 of 2009. And curiosity as gotten the best of me. I've been wondering for weeks about how the condo market is performing in terms of % of list price. And of course - what is the average price reduction sellers are taking?

We covered this a while back when summarizing the 2008 numbers. But 2009 has proven to be the craziest, least-predictable year yet. Here's what I found when I pulled the 10,453 listings that have come on the market this year from 01/01 - 06/30...

(As a reminder, our "market" here is Near North, Lincoln Park, Lakeview, Uptown, Edgewater, Lincoln Square, North Center, Albany Park, Irving Park, Logan Square and Bucktown/Wicker Park)

A few other tidbits:

• the total number of closed condo listings for the first 6 months is 1812
• using that number, only 17% of what has listed this year has sold
• of the 1812 that have sold this year, nearly 26% of them were "re-lists". In other words they were listings that had previously canceled and/or expired
•  the numbers are similar in a few ways to what we saw in 2008. For instance, if you don't come out of the gate at the right price (ie. if you have to take a price reduction to sell), you can expect to take as much as 3-times as long to sell
• in addition, if you come out at the wrong price, you will get a smaller percentage of your FINAL (not original) list price. Specifically, you'll do 1.6% worse...

I also pulled this information together for single-family homes in the same market. That's coming tomorrow.

Chicago's index defys all odds and... BOUNCES

Yesterday, the Case-Schiller report surprised me by announcing that Chicago was UP (yes, UP) in it's index from April to May. I was shocked. The Sun-Times carried the story and talked about the "glimmer of hope" we're seeing in the real estate market.

I quote the Case-Schiller index all the time. It's probably the simplest view of the real-estate market here in Chicago and the other 19 cities that have their own indexes. It's not perfectly accurate, but it's usually pretty close.

But I don't understand how Chicago is seeing a drop in demand of over 40% and suddenly the market on the north side BOUNCES? Any economist will tell you that when a market has momentum, it can't turn on a dime.

And yet, here's the index graphically in all it's bouncing glory.

I don't get it. More to come on this.

The numbers at halftime (for single-family homes)

Per my promise on Friday, I'm going to cut to the chase and present the 2009 single-family home projections through 06/30/2009.

Clearly these numbers are better than the halftime numbers for condos. But we're still seeing a reduction in demand of almost 26% in 2009 from 2008. And since the peak (2005), the north side is seeing a reduction in demand of 54%.

The same advice applies - price your home to sell at market value. If you put your house on the market too high and don't sell this year, you're going to have a harder time next year when the prices adjust after the 26% reduction in demand.

Introducing - more single-family home coverage!

Here at CHB, you'll notice I spend a lot of time talking about condo sales and what's happening to them in the market. The reason is mostly mathmatical. You see - there are a lot more condos that get listed and sold than there are single-family homes (roughly 5-times as many!) Simply-put, it's statistically more accurate to spot trends using condos.

An argument against this, however, is that there is a distinct difference between single-family home buyers and condo buyers. Certainly, here in Chicago, it takes more money to buy a home than a condo and because of that, there aren't as many first-time homebuyers in the single-family home market.

With that in mind, I've decided (starting with the 07/01 numbers) to begin projecting the single-family home closing numbers (and eventually prices).

As a recap, here are the neighborhoods we watch here on CHB:

• Lincoln Park
• Lakeview
• Lincoln Square
• North Center (includes Roscoe Village, St. Bens)
• Albany Park
• Irving Park
• Uptown
• Edgewater (includes Andersonville)
• Logan Square
• Near North (includes Streeterville, Gold Coast and Old Town)
• Bucktown/Wicker Park

Look for our first post (with the single-family home numbers through 07/01) tomorrow.

Forbes thinks they know what's going on in Greektown

In their never-ending quest to save their horrible publication, Forbes has published another boring list of stuff-that-no-one-should-lend-any-credit-to.

This time it's the list of neighborhoods where home-prices have fallen the most. Usually I don't like to give these kind of crap sandwiches any attention, but I had to this time because Greektown (in Chicago) is listed.

According to Forbes, the neighborhood home prices are down 50% year-over-year. As usual, I'll be doing some independent analysis to check their work. Something tells me that if home-prices are down 50% in Greektown from last year, we would have heard about it by now.

The numbers at halftime (for condos)

Well, the market seems to be a little warmer than we predicted it would be back in January. I'll just get right to it - here are the condo closing numbers through June 30 (half of 2009).

Quick note: I never posted numbers through 06/15. The rolled up numbers are here...

Rolled-up demand is still down 43% from 2008. This continues to improve from the -55% we saw back in February and March. Clearly the year started off REALLY bad for home sellers. The big question is - if the market ends up down 40% from 2008, what will that do to prices? There's no way we should see anything other than falling prices through 2010. The market looks better than it did in the beginning of the year. But don't confuse that with a sign of recovery.

I like to make the update a little different every time. So this time, I'm going to include closing numbers by neighborhood on the north side. Remember - the 2009 numbers are the latest full-year projections for closings:

More fun on the way. I have numbers for single-family homes now too! Stay tuned...

It could be worse?

Smartmoney.com just had one of those "well, at least you're not *this* fucked" articles last Tuesday. With the holiday week, I was busy working with clients and eating BBQ. So I'll cut to the chase and list the cities that fared the worst, but read the whole article to make yourself feel even better.

• Detroit
• New York
• Phoenix
• Portland
• Minneapolis

As far as I'm concerned, Minneapolis and the Twins can go straight to hell after their domination of the Tigers in the 1987 ALCS. But I was surprised to see New York and Portland on the list. In recent years, Portland has been that city that was doing OK amidst all the housing chaos. And we all knew the New York housing crash was just around the corner...

CHB is local to Chicago. So to give some perspective: Detroit's housing prices are at 1995 levels. Chicago's are (according to the same S&P Index) at 2003 levels. Do we have a way to go before the housing recovery happens?

This month in Real Estate - June

Not my favorite series, but something to sink your teeth into while we wait for the good stuff. Here's what I have cooking:

• First half study of list price vs. sales price
• Numbers through 06/15 and 06/30
• A 12-month local study of sales price vs. time on market (you'll like this one)!

Meanwhile, here's the video for This Month in Real Estate (June):