I happen to have a lot of one bedrooms in Lincoln Park and Lakeview for sale at the moment.  The remainder of my inventory is mixed between townhomes, houses, condominiums in various neighborhoods and a commercial condo.  With the one bedrooms representing a hefty chunk of my inventory, let’s take a look at what’s going on from that perspective.

Historically, the month of August is slow.  This is the month that most Chicagoans realize that  the days of summer are numbered, folks leave town for vacation, and otherwise people simply don’t pay a lot of attention to real estate.  Buyers that needed to have a home selected in time for the start of the school year did their shopping in late Spring and early Summer.  There were a lot of July closings and a few more closings to take place in August.

The economy is also dealing the real estate market a one-two punch.  Illinois’ unemployment is higher than the rest of the nation’s at 10.4%.  And the banking crisis, or the leftovers of it, make it challenging to get a mortgage even though rates today are at historic lows (Guaranteed Rate is offering a 30 year, fixed, conforming, loan at 4.375%!)

In a strong economy, studios and one bedrooms are strong sellers.  In a weak economy, demand for studios and one bedrooms falls off.  Demand for buying a studio or a one bedroom falls off even more.  This happens as fewer people can afford to live alone and start doubling up in larger units such as two and three bedroom apartments and condos.  The economy also removes a large section of people from the market as their purchasing power is diminished. 

Figures for the end of July tell a striking tale:

In Lincoln Park and Lakeview, combined, for the month of July, about twice as many two bedroom condominiums sold as one bedrooms.  The same ratio holds for properties that went under contract – or pending sales.

July 2010, one bedrooms, pending sales = 38

July 2010, one bedrooms, closed sales = 36

July 2010, two bedrooms, pending sales = 65

July 2010, two bedrooms, closed sales = 70

You can expect that traffic will be lighter than you have experienced in June and the first three weeks of July.  Traffic will stay light until the first weekend after Labor Day when buyers come back out shopping during the fall market.  This fall most Realtors are expecting a better fall market than last year’s and better than the Summer Market. 

The expiration of the buyer tax credit is far enough back in history that the “pulled forward” demand for homes should be exhausted.  And as the economy improves, though slowly here in Chicago, there are some folks relocating to Chicago, expanding their families, and needing to choose new housing.  We’re expecting demand to increase from “weak” to something even better than perhaps “tepid.”  Certainly nowhere near “blistering” by any stretch of the imagination.

During the month of August, while we have the time, it’s a good idea to have me, or your Realtor, prepare a new Market Analysis for your property.  If there are any new strategies to implement, or price changes that need to me bade, having the decision made during the slow month will allow the change to made promptly on Tuesday after Labor Day.  Expect a call from me in the coming days to set up an appointment to get together to go over the new Market Analysis.

Traffic index drops to levels not seen since credit crisis of late ’08:

Our Monthly Survey of Real Estate Agents indicated a sharp fall-off in traffic in June, adding to the slowdown that occurred in May following the end of the homebuyer tax credit. Our concern is that what would have been a short lull in demand following the end of the tax credit will now turn into a more prolonged period of weakness as faltering buyer confidence and job market concerns add to the troubles. We continue to expect weakness to persist at least through summer and now see some risk to our expectation that demand will begin to improve again in the fall.

Another round of declining home prices seems inevitable with the high and rising inventory coupled with limited traffic:

Our price index dropped to 32.1 in June from 38.9 in May, with June’s level being the lowest since June ’09. Agents noted sellers are beginning to capitulate on home prices in many markets, and we expect further pressure given the combination of the weak traffic and high inventory levels. This is supported by our time to sell index, which fell to 29.6 from 42.6 in May, with lower readings pointing to a longer time needed to sell a home (a negative leading indicator for pricing).

Data for Chicago:

Agents’ commentary in June reflected similar themes from our May survey, in which the market was still feeling the effects of the pull forward from the homebuyer tax credit. One agent mentioned, “I think the weakness still has to do with the tax credit. There are no buyers to be found. People lost their sense of urgency.” Other agents mentioned a lack of confidence in the economy, and “uncertainty over one’s employment status.” Fears over price declines also kept buyers on the sidelines, as buyers have become “less confident in price stability”. However, some agents did note that lower interest rates have created some demand, but that overall levels were still very weak.

Stats above for Lakeview.  7 days.

Pending and closed units: 62

New listings: 62

The graph doesn’t show residual inventory.  And there’s a lot.  Compare to last week (here) and you can see that last weeks supposition that we’re absorbing more inventory than is being added to the market, and you can see that the answer is “Not So Much.”

Stats above for Lakeview.  Past 7 days. 

Pending and closed units: 83

New listings: 81

These stats might demonstrate a turning point.  The number of units sold is exceeding the number of units coming on the market.  Hallelujah!

While checking the news feeds on the Holiday, Your Guide found himself quoted over at YoChicago (www.yochicago.com) last week:

The North Side market may look stable compared to other areas of the city, but Bob Darrow says he’s continually surprised by the number of quality homes that have been closing for well below their expected prices. The @properties agent and Your Windy City Guide blogger told me yesterday that it’s becoming more and more common to see homes sell for 10 percent below list prices, even in cases where those list prices are well below a seller’s desired value.

Yo!’s writer then dug deeper into sales data for Lakeview, Lincoln Park and North Center and found that more than a quarter of sales are for discounts of 10% or better.  Check out the post here.

First, the stats from the Illinois Association of Realtors:

In the Chicagoland Primary Metropolitan Statistical Area (PMSA) total home sales (single-family and condominiums) were up 36.7 percent in the first quarter of 2010 to 14,365 homes sold compared to 10,507 home sales in the first quarter of 2009. The region’s first quarter 2010 median price was $175,500, down 6.4 percent from $187,500 in the first quarter of 2009.

Interestingly, IAR predicts home sales to keep going despite the expiration of the tax credits.  At least compared to 2009 sales levels.

Forecasts for the next three months of April, May and June indicate sales increasing statewide in the 10 to 25 percent range and in the Chicagoland region in the 15 to 40 percent range compared to a year ago,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois. “Median prices will move upward adding almost $13,000 in Illinois and $16,000 in the Chicagoland region over the three months.

However, agents expectations for April were higher than the actual number of buyers who turned up.

From the Credit Suisse Monthly Survey of Real Estate Agents:

Our buyer traffic index fell to 26 in April from 34 in March, indicating traffic levels below agents’ expectations (any reading below 50 indicates traffic below expectations). Agents noted they expected to see a pickup in sales activity in April ahead of the April 30th tax credit expiration, but saw an underwhelming response from buyers throughout most of the month. One agent commented, “We may have exhausted the buyer pool – not sure, but demand is not there like last year.” Another agent agreed that they were still dealing with the lull in demand from the significant pull-forward last fall, noting, “There was an absorption of spring buyers by the 2009 tax credit.” One agent saw a delayed response to the tax credit expiration, commenting that, “Demand for the tax credit deadline kicked in LATE April.”

Your Guide agrees:  A flurry of activity in the last week of April can be attributed to the expiration of the home buyer tax credit.  But oddly, my own buyers, and the buyers who purchased listings of mine were not in the marketplace as early as I had recommended – namely in Spring right after the Superbowl.

At the Sun Times:

The number of Chicago area homes lost to completed foreclosure auctions jumped 56 percent in the first quarter from a year earlier to the highest level since the beginning of the mortgage crisis in 2006

At the Chicago Trib:

More than 125 apartment buildings in Chicago on average went into foreclosure each week of 2009, affecting tenants living in almost 21,000 rental units, according to a new report.

And the phenomenon has finally impacted business for Your Guide.  We listed a condo in Uptown last year – and we knew the circumstances would lead to a distressed sale.  The owner was struggling to make payments, and the amount we thought we could sell the unit for was far less than the balance owed on the mortgage.

Over the course of many months, we tried a wide range of pricing, and showed the home many times.  A great popular listing, the unit showed well and after a few price reductions was below the market for its size.

After 7 months of marketing and showing, we received two contracts.  The second contract stuck and we began negotiating with the mortgage holder to see if they would accept a short sale.

Two months went by, and our short sale attorney expert seemed to be making headway with the lender. 

Unfortunately, and quite abruptly, we were notified that the condo was foreclosed upon.  It’s quite interesting how little really happens in a circumstance like this.  The judicial sale happened in a quiet courtroom and was not attended by our seller, or their attorneys.  The date came and passed, and the only notice that we received was a note taped on the door to the building. 

These days there really isn’t even an eviction.  The agency that takes care of the property made friendly contact with the current renters, and made an offer of “Cash for Keys.”  The management firm offers the current residents a financial incentive to move, and gives them a few weeks to make the move.  And when the unit is empty, the new manager comes over and swaps keys for a check to pay for moving expenses. 

Quite civilized.

The number of Chicago area homes lost to completed foreclosure auctions jumped 56 percent in the first quarter from a year earlier to the highest level since the beginning of the mortgage crisis in 2006.

The increases are likely tied in part to the Jan. 31 end of restrictions that prevented mortgage servicers from completing foreclosures on any homeowner who had applied for help through the Obama administration’s Making Home Affordable Modification Program and the lifting of moratoriums on foreclosure sales instituted by many major financial institutions over the December holidays.

That’s a bit scary.

From another perspective, we have been listing Fannie Mae owned properties at the rate of one-per-week, and a successful sales rate of about half.  After 90 days, the other half go to absolute auction.  One short year ago, no one had ever even heard of Fannie Mae owned homes.

The next few months should be very interesting.  I am extremely curious to see if the improving economy offers any relief to struggling home owners here in Chicago.  We have not seen any relief in Illinois to our staggering un-employment, so am very concerned that we’re not near the end of the crisis, and it could continue for the rest of the year.

I just listed a townhome in Lakeview, and am working with some Lakeview buyers this evening and weekend, so thought it might be a good idea to look at the same stats but in Lakeview.

An interesting trend in the following chart:  Zillow’s home value index demonstrates reasonably stable prices in Lakeview for the previous 12 months. 

Zillow Home Value Index

More Lake View Home Values

But I have the option with this analysis tool to view Sales Prices for the same period, the results show more volatility in prices.

Median Sale Price

More Lake View Home Values

Mind you, the data above can reflect that more buyers have by chance (or by popularity in the marketplace) purchased more lower-priced listings.  It’s most likely that this is the reason for the fluctuation over the months of November, December, January yet the stability in the chart for the Zillow Home Value Index.

In any case, this is good news for the listing I just took, and the listing coming on the market in the next couple weeks.  Stability over the last 6 months after the steep decline in 2008 through 2009.

An interesting article from the Chicago Sun Times (link here) examining statistics from the Illinois Association of Realtors examines prices in Chicagoland and reveals that the volume of sales is up – the 8th straight month in a row.  But prices are down significantly.  

Chicago metropolitan area home sales jumped 32 percent in February from a year earlier, the eighth straight increase, but the median price dropped 10.3 percent, the Illinois Association of Realtors said Monday.

We had seen signs that prices stabilized in November and December last year.  But the slide has started again. 

As Your Guide was working with Lincoln Buyers last week, here is the market data for the Lincoln Park neighborhood.  (Steve and Karen, this chart’s for you!)

Zillow Home Value Index

More Lincoln Park Home Values

UPDATE:  Great article from the Medill/Northwestern School of Journalism about the rising foreclosures in affluent neighborhoods of Chicago including Lincoln Park and Roscoe Village.

In the Lincoln Park neighborhood, foreclosures shot up 103.2 percent in the second half of 2009, according to the Woodstock Institute.

In fact, the number of foreclosures in swanky neighborhoods throughout Cook County last month drove the county’s foreclosures to highest level since the recession began with a total of 4,426 in one month, up 76 percent from 2,517 in the previous month and up a whooping 703 percent from 551 in September last year, according to RealtyTrac.

Our buyer traffic index inched up to 41 in January from 40 in December, indicating better traffic over the past 30 days and absolute levels only modestly below agents’ expectations (a reading
of 50 would suggest traffic in-line with expectations).

The survey shows that agents still feel that prices slid in February.  Competing pressures on prices seem to be two fold.  Pushing prices up: pent up demand and the rush to cash in on the  home buyer tax credits.  Pushing prices down: Excess inventory and lingering foreclosures.

Comments from real estate agents:

• “Prices have gone down since last month and more buyers are feeling that they are nearing bottom.”
• “Traffic is less than expected and the traffic we do have is mostly bargain hunters
  looking for major below market prices.”