September marked the first month in which the metropolitan Chicago real estate market felt the full impact of the end of the federal income tax credit for homebuyers, which had been in effect in one form or another for nearly two years. The result was a mix of signs, with homes selling more quickly than they did in the same month last year but with fewer homes changing hands.
Year-to-date home sales in the metro area through September remain 14 percent higher than during the first nine months of 2009. A total of 5,264 homes changed hands in September compared to 6,893 in September 2009, a 24 percent decline that is quite similar to sales levels seen in July and August.
On the bright side, homes sold in September were on the market for an average of 159 days, or 7 days less than the average for homes sold in September 2009.
“A significant number of sales that might have been completed in September were accelerated by buyers eager to qualify for the tax credit,” says Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network. “We believe that over the next several quarters the metro Chicago real estate market will hold at current levels, relative to year-earlier volume, and then we expect activity to increase substantially as the jobs picture improves.
“The tax credit stimulus is over, which means September results give us a good picture of where the market stands moving forward,” Merrion adds.
“The fact that sales were 24 percent below their year-earlier level isn’t too surprising considering that a year ago the tax credit was in effect and set to expire at the end of November, so it was a period when many buyers were hurrying to take advantage of the opportunity. One must also remember that home sales potentially eligible for the tax credit constituted 10 percent of August transactions and 20 percent of those sales closed in July.
According to a RE/MAX analysis of September home sales data from Midwest Real Estate Data, LLC, sales of detached homes fell 20 percent to 3,471 units from 4,366 units in September 2009. Sales of attached homes, which primarily include condominium apartments and townhouses, declined 29 percent in September to 1,793 units from 2,527 units a year earlier.
RE/MAX reports that the average price paid for those homes that changed hands in September in the metroChicago real estate market was $238,592, which is 4.6 percent less than the average price a year earlier.
“Home prices are still under pressure from the large number of distressed properties on the market,” says Merrion. In September, sales of distressed properties accounted for 2,239 sales in the metro Chicago area, or 42.5 percent of all closed sales.
“That is the highest percentage of distressed sales, relative to total sales, that we have seen since March and helps explain why prices looked softer in September than in August,” says Merrion. He notes that for detached homes the percentage of total transactions represented by properties selling for less than $150,000 rose to 38 percent this September from 32 percent a year earlier.
The high percentage of distressed sales and the large number of homes changing hands at the low end of the price range, “suggest that investors, who are often attracted to these types of properties, were quite active in September,” Merrion says.
Among the seven counties that make up the metro Chicago real estate market, all experienced a decline in total September sales relative to the same month last year. Kane County had the smallest drop in sales, just 7 percent to 375 units, while McHenry County, with 197 sales, recorded the steepest decline at 31 percent.
Home sales for September were 3,052 units in Cook County (down 25 percent from September of last year); 562 units in DuPage County (down 30 percent), 110 units in Kendall County (down 15 percent), 516 units in Lake County(down 11 percent) and 451 units in Will County (down 27 percent). Total home sales in Chicago totaled 1,441 units, a 28 percent decline.
In the detached-homes segment, Lake County recorded the best result in September, with 423 homes changing hands, just 4 percent less than the same month in 2009. Results for the other counties were: Cook 1,753 homes (down 23 percent), DuPage 394 homes (down 22 percent), Kane 315 homes (down 7 percent), Kendall 74 homes (down 22 percent), McHenry 156 homes (down 31 percent) and Will 355 homes (down 27 percent). Detached-home sales in Chicago fell 24 percent to 630 units.
Kendall County turned in the strongest performance in the attached-homes segment with a gain of 3 percent on sales of 36 units. Attached-home sales in the six other counties were: Cook 1,299 units (down 28 percent); DuPage 168 units (down 43 percent), Kane 60 units (down 10 percent), Lake 93 units (down 31 percent), McHenry 41 units (down 33 percent) and Will 96 units (down 29 percent). In Chicago, sales of attached homes totaled 811 in September, a decline of 30 percent.
“Because they attract a larger percentage of first-time buyers, attached home sales received more of a boost from the tax credit than the detached segment and have been impacted more sharply by the expiration of that stimulus,” Merrion says.
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. The RE/MAX Northern Illinois network consists of 2,500 associates and 120 individually owned and operated RE/MAX offices that provide a full range of brokerage services throughout the northern one-third of Illinois.