Chicago Real Estate Market Shows Growing Short Term Weakness

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In the aftermath of the homebuyer tax credit, Lucid Realty's August Chicago Real Estate Market Summary shows growing short term weakness but longer term strength.

Chicago's Full Service, Discount Real Estate Broker

For the fourth month in a row the indicators have remained negative.

Today, Lucid Realty, Inc. announced the results of its August Chicago Real Estate Market Summary, compiled from 4 different data sources. The real estate market summary contains 7 different indicators of the residential housing market.

"For the fourth month in a row Chicago's real estate indicators have remained negative. This is the logical consequence of the ill-advised government intervention in the housing market ending. It's only a matter of time before these negative trends are reflected in lower short term prices", said Gary Lucido, Lucid Realty co-founder and President. "However, we believe the longer term outlook is still positive, given record low mortgage rates and home prices well below the long term trend line for Chicago."

August Sales Volume Was Down 24% Over Last Year

The Illinois Association of Realtors will announce August home sales for Chicago on Thursday. According to data from the Multiple Listing Service (MLS), home sales will be reported down approximately 24% from last year to the lowest level in at least 10 years, despite the fact that mortgage rates are at the lowest level in decades.

August Contract Volume Was Down Over Last Year

According to data from the MLS, the reason that August home sales are so low is that most of the contracts written during the surge in activity while the homebuyer tax credit was in effect have already closed. Since the expiration of the tax credit contract activity has plummeted and has been down between 14 - 23% per month. Since closings typically lag contracts by 1 - 2 months this indicates that, for at least the next couple of months, sales volume will be down from last year.

Home Prices Have Been Rising Lately But Are Still Well Below Trend Line

The most recent Case-Shiller Chicago Home Price Index (June) was the third month in a row that home prices showed an increase. After bouncing off of a second bottom Chicago home prices are now up 4.3%. However, home prices are still 12.3% below the trend line extrapolated from 12 years of pre-bubble historic data. The recent plunge in home sales will surely put downward pressure on home prices in the near term. However, home prices should return to the trend line over the next few years.

August Inventory Of 2 - 3 Bedroom Condos Rose Over Last Year's Level

Although Chicago's inventory of 2 - 3 bedroom condos available for sale fell in absolute terms in August the number of contracts written fell by an even greater percentage according to data from the MLS. Therefore, inventory rose on a months of supply basis - to a 15 months supply vs. 14 months last year. However, inventory levels vary dramatically across neighborhoods.

August Foreclosure Activity Is Up 60% Over Last Year

According to RealtyTrac, August foreclosure activity in Chicago rose 60% over last year. However, there is a great deal of variability in the month-to-month numbers. What is more significant is the fact that for several months now foreclosure activity has been higher than last year.

Distressed Property Sales Comprised 40% Of August's Sales

Based upon data from the MLS, 40% of the home sales in August were either short sales or foreclosure properties, indicating that the few buyers that are out there are looking for exceptional bargains.

July Employment For The Chicago Metro Area Was Up For The 6th Month In A Row

Another long-term positive indicator is the increasing employment level in the Chicago Metro area. July data (the most recent month available) from the Bureau of Labor Statistics shows an increase in employment for the 6th month in a row. Employment has risen to 4,399,406, which is a 3% increase from the 14 year low of January.

Lucid Realty maintains a Web page at ChicagoHousingStats.com that always contains the latest information on the Chicago real estate market.

About Lucid Realty, Inc.
Lucid Realty, Inc. is the Chicago area's full service, discount, real estate brokerage. Lucid Realty distances itself from traditional brokerages and provides a better value to the consumer:

  • It is a full service broker,
  • Offering substantial savings to both buyers and sellers,
  • Providing services by employees not independent contractors,
  • Working as a team instead of competing against one another,
  • With professionalism and high standards of customer service.

More information is available at LucidRealty.com

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Gary Lucido
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