Blame it on Distressed Properties: September’s Housing Numbers

Sales Up - Prices Down

This morning the Illinois Association of Realtors reports that for the month of September 2009 the number of residential sales were up 3.3 % but the median sales price was down to $160,000 statewide, a 9.3% decrease compared to September 2008. Following the state's trend, in the City of Chicago the number of units sold were up 5.8% to 1,918 sales compared to 1,813 homes sold in September 2008. Chicago's median price in September 2009 was $225,000 down 16.2 percent compared to $268,600 a year ago in September 2008. The City of Chicago's numbers must distinguished from the Chicago PMSA, as defined by the U.S. Census Bureau, which includes the counties of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will where the median sales price was only $199,000.

Why the Increase in the Number of Sales but the Decrease in Pricing?

For the traditional homebuyer pricing is at levels we saw in 2004. Short sales and foreclosures have been impacting property prices giving buyers the opportunity for good value without having to buy distressed homes or deal with the short sale process. Interest rates have been hovering around 5%. The first time home buyer tax credit has been an incentive for some. Home buyers have repositioned themselves to meet the new lending guidelines by saving money for a down payment. It is not unusual to now see buyers putting 20% down.

What the Next Months Will Bring

Just like the numbers, it will be a mixed bag. Distressed properties will continue to impact market pricing for months and even years to come if unemployment does not go down. Banks inventory of REO properties continues to grow. Many homeowners are opting to wait it out in their current home for a while if they can, especially those who have only owned their properties for the last few years. Just have buyers need to be qualified to buy, sellers need to be qualified to sell. The median sale price will rise only if financing becomes jumbo financing becomes more readily available. Chicago's $500,000 - $1,000,000 market is crippled by having a much lower conforming loan number of $417,000 than in many other areas of the United States. We will consider to see qualified buyers entering the market as a result of relocation and buyers who have financially readied themselves to move forward with a home purchase.