Home sales activity in August suggests that the metro Chicago real estate market is healing after the sharp decline in sales recorded a month earlier and triggered largely by the expiration of the federal homebuyer tax credit. That was the conclusion of an analysis by RE/MAX of home sales information collected by Midwest Real Estate Data, LLC, which is the regional multiple-listing organization.
Though the picture was considerably brighter than in July, sales activity in the seven-county Chicago metro area during August was 19 percent lower than in August 2009, with 5,609 homes changing hands this August compared to 6,943 a year ago. In contrast, July sales totaled 5,581 and were 25 percent lower than the same month in 2009.
“The improvement in total sales activity was not enormous, but when you look past that number, there were quite a few encouraging signs,” says Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network. “For instance, sales of detached homes were down just 15 percent in August compared to 23 percent in July, and the average price for all homes sold this August was $274,442, compared to $265,542 a year earlier. The average time that homes sold in August spent on the market was 154 days compared to 164 days a year ago.”
According to Merrion, an important aspect of the August sales results was that closings on homes eligible for the federal tax credit fell to less than 10 percent of all transactions from about 20 percent in July. Homes that may have been eligible for the tax credit were those that were under contract by April 30 of this year and closed by Aug. 30.
“The fact that more than 90 percent of August home sales were not related to the tax credit is definitely encouraging,” he says. “It shows the market can survive without that stimulus. In my view, the housing market looks as if it is stabilizing, and best of all, prices of detached homes in the metro Chicago area could be poised to hold steady as we move ahead. I don’t expect prices to rise noticeably this fall, but the outlook for the spring 2011 market is getting brighter.”
Merrion points to the fact that in August the average price of a detached home in the seven-county area rose to $294,003, the highest it has been since 2008 and 5.4 percent higher than in August 2009. The average price of a detached home also increased in four of the seven counties in the metro Chicago area, including Cook, DuPage, Lake and Will, when compared to August 2009.
On the other hand, the average sales price of attached homes rose only in Lake County during August.
“There is no question in our view that the end of the tax credit has had a greater impact on the market for attached units than on demand for detached homes,” says Merrion.
“The reasons for that, we believe, are that attached homes attract a larger number of first-time buyers, who were helped most by the credit, and attached homes tend to be lower in price, making the tax credit a more significant incentive for those buyers.”
According to Merrion, sales of attached homes were 43 percent higher during the first half of 2010 than during the same period in 2009, while sales of detached homes rose 34 percent.
“In our region, sales of condos and townhouses probably benefited most from the tax credit, and it stands to reason that the post-tax-credit sales contraction is also more pronounced in that segment,” he says. “Many condo sales that closed early this year might have been completed in July or later if not for the tax credit. Because so many sales were pushed forward, it will take longer for the attached market to normalize again and for existing inventory to shrink. By early next year, we expect a noticeable rebound in that segment, especially condo sales.”
The plight of the condo market was quite visible in the City of Chicago during August. Closed sales of attached city homes fell 31 percent to 864 units from 1,246 a year earlier, while sales of detached homes fell just 13 percent. However, the average price of those attached units that did sell increased 5 percent to $331,050. In comparison, the average sales price of a detached home in Chicago fell 8.4 percent to $225,670 in August.
The percentage of all sales in the metro area involving distressed properties, including short sales and foreclosed homes, fell just slightly in August to 37 percent from 38 percent in July.
Compared to the levels of August 2009, sales of detached homes last month were relatively stable in Will County (down 7 percent) and Kane County (down 5 percent). Sales were off 12 percent in McHenry County, 19 percent in Lake County, 16 percent in Cook County, 22 percent in DuPage County and 27 percent in Kendall County.
Sales of attached homes were essentially stable in Kendall (up 3 percent) and McHenry (down 2 percent), but fell as much as 44 percent in Will County, 36 percent in Kane County, 28 percent in Lake County and 26 percent in Cook County. DuPage County had a more moderate decline of 11 percent.
“Another encouraging sign is in the area of pending sales. At the end of each month we total up the pending sales in the RE/MAX network, and that number has been rising steadily,” says Merrion. “Sales during the last half of 2009 were relatively good thanks to the tax credit. The market has fallen behind its 2009 pace in the last two months, but we look to close that gap as the year progresses. Our total transactions closed for 2010 through August are running 12.2 percent, or 2,232 units, ahead of last year.”
RE/MAX is the leader in northern Illinois real estate sales. It has been number one in the metropolitan Chicago real estate market since 1989, closing more than $6 billion in sales last year. Its www.IllinoisProperty.com and www.Remax.com websites are leaders in consumer visits among real estate brokerage brands.