Chicago Housing Bubble

Single family homes through 2009!

Single-family homes are a little less interesting and predictable than condos from a numbers perspective. This is due mainly to the fact they don't exist in large closing numbers. The turnaround time for families in a single-family home is longer. And they take up more overall space. This leads to fewer transactions on a yearly basis.

Regardless, it's nice to look at the data and spot some trends. You'll notice I pulled out some of the neighborhoods that aren't really "single family" neighborhoods. South Loop, Near North, and West Loop are missing on purpose. Uptown really should have been pulled as well.

First, the sales numbers...

The only notable thing I can spot is the Irving Park numbers having gone up 18% in 2009. What you can't see is that 46 of those 139 were short-sales, foreclosures or court-approved sales. So while the transactions were up 18% from the year before, if you take out the distressed properties, it was actually down 21%. More on distressed properties next week...

 

Prices get even weirder in the numbers (especially without digging into the number of bedrooms). From cutting data obsessively for the past 18 months in all the northside neighborhoods, I can say (with confidence) that if you bought a home in 2005, it's worth less today than it was then. The numbers in every neighborhood here reflect it. And hey - Uptownites - don't read too much into your neighborhood's "positive" numbers - 21 total sales is too small a sample to get an accurate read.

Meanwhile, my favorite head shaker is Lincoln Park. No matter how I cut the data, how far I go back, how many bedrooms I use - LINCOLN PARK single family homes will not quit! The Lincoln Park SFH market just keeps going in the right direction.

Post comments if you have them. Meanwhile, there's more to come this week and next.

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 :-)

How are prices doing?

OK, we're back in the game here. I have a bunch of stuff coming. First things first: How are prices doing?

As you might remember from my posts, I use 2 bed, 2 bath condos (for the condo market) to determine what's happening with prices. Why? Because 2/2's are a common sales point for entrance into the market. More of them sell than anything else, and with big numbers, you get accurate trending.

Here's what we have:

It doesn't come as any shock that we have prices being down from the peaks of the market. But the thing I'm paying attention to is where are from the previous year.

You can see that every neighborhood has seen a drop (except North Center) since 2008. So yes - if you bought last year, your condo is worth less today than it was a year ago. That means you lost money. That means the market won't pay the same amount you paid for the same place. Please read this paragraph back a few times.

Where is the bottom? This is what I'm trying to figure out. Next up: prices for single-family homes. Then transaction closings and contracts for both categories. After that I have some other nerdy analysis to share that I think you'll like. Really, I mean it this time - stay tuned.

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...

"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).

Bread and butter condos losing steam

(I hate when people don't update their sites. I've become one of those people. And I'm ashamed. I'm sorry fellow nerdy Chicago real estate junkies. This will not happen again. Just kidding - it probably will happen again. I usually wait until I see something interesting to write.)

A client of mine asked me a great question on Thursday night: if we take a loss on our condo in Albany Park (they're on the market right now), and buy in another neighborhood - have those neighborhoods taken AS BIG a loss? In short - he wanted to know that if they're going to get their asses kicked on price that everyone has had an equally painful ass-whopping. So I looked into it.

Here are results on 2 bed, 2 bath condos since 2005 for price (I typically consider the 2/2 to be the bread-and-butter of the Chicago condo market). The peak year for price is shaded in green...

Prices have been going down since the peaks in the northside neighborhoods. And for the first time, NO neighborhood is immune (I'm looking at you Lakeview).

So - to answer the question - has Albany Park fared worse? Yes. Is everything else going to "catch up". Yes - it definitely looks like it.

The hot neighborhood

"This area is very desirable - I'll have no problem selling"

I’ve heard that a few times from clients as they come to terms with the market. Let's take a look at the reality. I looked at 2 areas on the north side that are typically defined as "desirable". The North/Damen/Milwaukee intersection (ground zero of Bucktown), and the Southport Corridor. Here's what I found.

AREA: "North/Damen/Milwaukee"
I used the half-mile square around the intersection: roughly Schiller to Bloomingdale, Wood to Leavitt.

Type	Listed	Sold/Contract	Median List	Median Sale
Condos	198	95	$452,500	$410,000
Single Fam	80	21	$1,299,000	$1,050,000

48% of condos sold. Those that did were typically 10% below market.
26% of homes sold. Those that did were typically 19% below market.

AREA: "Southport Corridor"
I used the half-mile square from Racine to Ashland, Belmont to Addison.

Type	Listed	Sold/Contract	Median List	Median Sale
Condos	302	141	$439,900	$415,000
Single Fam	51	17	$1,900,000	$1,490,000

47% of condos sold. Those that did were typically 6% below market.
33% of homes sold. Those that did were typically 22% below market.

So that’s what you get in a “desirable” location. How about a neighborhood that isn’t as magnet-y as the Southport Corridor or Bucktown? Let’s take a look at the first half-mile square west of California in Albany Park. Still a beautiful neighborhood, but not typically what people think of first when they think “north side”…

AREA: Albany Park
I used the half mile square from California to Kedzie, Irving Park to Montrose.

Type	Listed	Sold/Contract	Median List	Median Sale
Condos	226	44	$259,000	$236,750
Single Fam	32	7	$351,950	$309,950

19% of condos sold. Those that did were typically 9% below market.
33% of homes sold. Those that did were typically 12% below market.

Moral(s) of the story...

• The 3 L’s of real estate are alive and well
• if you followed the 3 L’s it gives you a 50/50 chance of selling (instead of a 20/80 chance)
• if you’re above market on price, you’re not going to sell anytime soon

Wicker Park 2008 market results

I toyed with the idea of combining Ukranian Village and Wicker Park when pulling these numbers, but thought better of it when I imagined the responses I'd get from people. I'm sure it would have gone something like this: "I live in the *real* Wicker Park. If you think a house that is at Chicago and Hermitage is in the same market as a house at Wicker Park and Damen, then you clearly don't know what you're doing. You're stupid and I'm never reading your blog again."

Or maybe: "YOU'RE A LOUSY FUCKING SOFTBALL PLAYER, JACK!"

Either way I don't give a damn what you think you're entitled to. So I split it out. I may get the last laugh because these sample sizes are exceptionally small. And we know from our college statistics class that small sample sizes mean a high degree of error. I recommend using the overall trend numbers for condos and single family homes to get a feel instead of the bedroom breakdown charts. Proceed with caution...

Here are the numbers.