Are you confused about home sales? If so, you have lots of company. There is a good news, bad news story going on out there and it is sometimes hard to figure out who has got the story right. While the market is down 15% year over year, Chicago area home sales in March of 2011 were up 41.3% over February. Prices in the Chicago area are down 14% over last year, but up 3.6% in March versus February 2011. Some 53% of home sales in all of Chicago and suburbs were distressed properties. What is happening is what was predicted: the market is clearing out the inventory of distressed properties, volume of sales is increasing, prices are moderating. The recent month over month statistics are more meaningful because last year the market was heavily skewed by the government tax credit.
If you read Crain's Chicago Business today the headline is "Local Home Sales Fall For 9th Straight Month." The story relies on year over year statistics that admittedly show a fall in activity. But again, this dismisses the impact of government stimulus on the statistics. The fact is that the real estate market is slowly improving with the rest of the economy. The bright spots are that the inventory of distressed properties is being washed out of the system, corporate profits are rising, retail sales are improving, job creation, although still anaemic, is happening. The National Association of Realtors index of affordability is at 13, meaning that homes have never been more affordable since NAR began keeping records in 1970.
On the minus side, mortgages are hard to get and with the fate of Fannie Mae and Freddie Mac in flux the lending markets are moving cautiously. Employment is lower in Chicago than it has been for two years, but at 8.9% it is still too high for home sales to really get traction. Finally, the volume of distressed properties on the market will increase this year putting downward pressure on prices.
But the fact remains that sales volume is increasing and prices are moderating. The fact that the economy in general is improving bodes well for real estate. And no one is building new housing, making a shortfall likely in a few years. Koenig & Strey continues to outperform the market and is well positioned for the future. As you might expect, we are very bullish on the Chicago real estate market.