Given the uncertainty that developed in the economy last autumn, waiting seemed like the wise choice. Now the equation is changing and buying looks much more attractive than it did at the beginning of the year, especially for those who qualify for the tax credit.
Chicago, IL (PRWEB) August 20, 2009
Home sales activity across the metropolitan Chicago real estate market moved in divergent directions during the first half of 2009, but by mid-year the gap was beginning to close and the market as a whole was looking stronger, according to an analysis by the RE/MAX Northern Illinois real estate network of home sales data from Midwest Real Estate Data, LLC, (MRED).
Unit sales of all homes (attached and detached) fell 20 percent for the six-month period when compared to the same months in 2008. Sales of detached homes fell only 5.8 percent, while sales of attached homes (primarily condominium apartments and townhouses) dropped 36.8 percent. Within the City of Chicago, the divergence was even more pronounced, with detached sales increasing 15.8 percent and attached sales declining 44 percent.
Suburban home sales activity showed a similar but more muted pattern. Sales of attached homes fell 28.6 percent, while the number of detached homes sold declined just 10 percent, after posting a 27 percent decline a year earlier.
"It's an odd situation to see such a difference between the level of sales activity in these two market segments, but these have been unusual times," said Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network. "Sales of detached homes have strengthened because the buying environment could hardly be better. Affordability has improved. There is a great selection. First-time buyers can get a tax credit. We are seeing quite a bit of interest from investors in distressed properties, but primarily for detached homes."
The outlook for attached home sales is also improving, but much more slowly. That portion of the market was impacted more severely by the nation's severe economic problems, which emerged about a year ago, than were sales of detached homes, according to Merrion.
The good news, Merrion reports, is that sales activity in both categories has been strengthening. In June, sales of all homes were down just 6.5 percent from the same month in 2008, and sales of detached homes were up 2 percent. Meanwhile, sales of attached homes, which were off 46 percent during the January-March quarter, were down only 19.4 percent in June.
"We do seem to be seeing the condo market beginning to bounce back from the problems it faced from the fourth quarter of last year through the first quarter of this year," said Merrion. "It isn't back where we'd like to see it, but the direction is quite positive."
Most attached homes involve some form of condominium ownership, "and that has been complicating the sales process," said Merrion. "Where buyers want to use FHA or VA financing, the condo building must first go through an approval process, and only about a third of condo properties have done so. Even with conventional financing, getting a mortgage loan is more challenging these days because underwriting standards have become quite stringent. For example, Fannie Mae's current guidelines say that no more than 20 percent of a condo project can consist of non-residential space. Many newer condo buildings in Chicago contain 25 percent retail space."
However, with the overall economy showing signs of stabilizing, Merrion believes condo sales will continue to pick up.
"Many condo buyers are either first-time buyers or empty nesters, and both groups often have the choice of buying now or waiting," Merrion said. "Given the uncertainty that developed in the economy last autumn, waiting seemed like the wise choice. Now the equation is changing and buying looks much more attractive than it did at the beginning of the year, especially for those who qualify for the tax credit."
The increased activity in the detached segment was felt across the metropolitan area during the first six months of this year. Forty-three Chicago neighborhoods and 88 suburban towns registered an increase in detached-home sales for the January-June period when compared to the same six months in 2008. A year earlier the comparable numbers were 11 city neighborhoods and 15 suburbs. In Cook County, detached sales rose 4 percent while attached sales fell 44 percent.
The improvement was less noticeable but still quite real when looking at home sales in other counties. In Lake, McHenry, Kane, DuPage, Kendall and Will counties, detached sales declined when compared to the first half of 2008, but not nearly as much as attached sales. In Lake County, for example, detached sales fell 14.5 percent, while sales of attached homes were off 29.4 percent.
For the other five counties, the results were as follows:
McHenry: detached -14.8 percent; attached -29 percent;
Kane: detached -16.4 percent; attached -37.7 percent;
DuPage: detached -13.6 percent; attached -33.7 percent;
Kendall: detached -7.4 percent; attached -32.4 percent;
Will: detached -14.5 percent; attached -17.4 percent;
"I'm moderately confident that we will see continued improvement across the metropolitan area in the months ahead," said Merrion. "I'm especially optimistic about the condominium market. I believe some of the loan underwriting issues will be resolved, and the first-time buyer tax credit that is due to expire at the end of November will have a positive effect. Condos are the type of home first-time buyers choose most frequently. So, it's likely that many buyers who have been waiting to pull the trigger on a condo purchase will decide to move ahead in order to capture that tax credit."