Chicago Housing Bubble

Condo numbers through 2009!

DAMN! 5 full years of data to play with!!! I always say New Year's is my favorite holiday...

I'm going to post condo numbers today and single-family home numbers tomorrow. I have some other changes coming up on the blog too. But as I said yesterday, I'm not going to make any promises I can't keep. So I'll save those announcements for when I can actually deliver them.

On to the numbers...

We knew transactions were going to be down in 2009 from 2008. In fact, at halftime, we were predicting transactions in the condo market to be down as much as 43%. But then a little thing called the Obama Tax Credit (that's not the technical name) came along. And Q4 of 2009 turned the transactions on a dime. In fact, December of 2009 boasted almost TRIPLE the number of transactions (in our "watch" neighborhoods) as December of 2008. 

(P.S. I knew that credit would do something funny to the market, but that triple-December shit threw me for a loop.)

(P.P.S. Is it "threw" or "through"? I think it's "threw", but I'm not sure. I'm trying to stay focused on the numbers.)

Prices in the neighborhoods did what they were supposed to - they followed suit. If demand falls out of the market, prices naturally have to adjust (or people will simply stop buying homes). And since people didn't stop buying homes, prices made their adjustments.

There is some correlation here. The neighborhoods with big drops in sold listings also saw some of the biggest reductions in prices. In short - the South Loop got its ass kicked.

So what's up in 2010? With an overall reduction in transactions of 24%, that should translate to even lower prices in 2010. But it will take some numbers from all of Q1 to really see what's going to happen. And here's the wrench in the prediction engine - that credit was extended through 04/30/2010. So expect some craziness.

We'll keep our eye on it though.

West Loop, Ukranian Village, Wicker Park and Bucktown in 2009 (so far)

I met with a client last week who will be shopping in a few different neighborhoods in the new year. And as part of the... uh... let's call it "discovery process", he wanted to see some statistics on the market in those neighborhoods.

Considering the fact I haven't posted in nearly a month and that I have some fresh stats, I thought: "What the hell, stop being a jerk and put those stats up on that super-awesome site of yours. I mean, this content can't write itself. It needs your brilliant mind."

First things first - transactions...

My guess is that you're smart enough to ask the question: "How is 2009 relevant if it isn't over yet?" Well, it's relevant to me because December will not produce more than about 7-9% more closings (at most). In the West Loop, that would account for just 18 more closings (again - AT BEST) and drop the transaction loss from 2005 to 34%. Bottom line - the market took a huge hit in number of sales this year.

And yes - it took a big hit DESPITE the homebuyer tax credit that expired and was then renewed at the end of November.

Moral of (this part of) the story: the homebuyer tax credit extension will not turn the market on a dime in 2010.

On to prices...

We did start to see some Q3-Q4 price improvement in 2009. By improvement, what I mean is that the bleeding seems to have stopped (for now). Here's the picture...

For the CHB un-initiated, we measure 2/2's here to get a good thermometer of the overall market. You might be buying/selling a 3/2 or a 1/1 or a studio or coachouse or whatever... but the trends will be similar. If you bought in 2004/2005, in almost EVERY situation, you're likely down on price. But the picture might be a little better than it was earlier this year.

So what's next? We'll have to see some January/February numbers to start to get a picture for what will happen in 2010. My analysis: we'll not see any price improvement in 2010, and if transactions continue to fall on the northside, we'll continue to LOSE VALUE in 2010.

But my guess is - we're at the bottom. That's right folks, my VERY EARLY PREDICTION is that we're at the bottom of the northside Chicago housing market. And we're going to be sitting here on the floor for a while.

I can't wait to see what happens next :-)