It’s been a nice summer, hasn’t it? We’ve had three good, hot months—and I’m not talking about the weather. The new Case-Shiller information that came out Tuesday showed that home prices in the Chicago area rose for the third month in a row.
The data, covering June, showed prices popping up by 4.59 percent over May. That’s after a 4.4-percent increase in May, and 1.1 percent in April. In all, prices went up 10.5 percent from March to June.
Perhaps even more significant is the month-by-month narrowing of the gap between 2012 and 2011 prices. In the April 2012 data, released in late June, prices were 5.6 percent below where they had been in April 2011. The following month, they were 3 percent below the prior year, and this latest data has June 2012 prices just 1.7 percent below June 2011. In the past few months, prices have rolled forward from being even with their April-May 2000 levels to their June 2001 levels—meaning the summer’s improvements have returned about 13 months’ worth of lost progress into homeowners’ equity.
With Labor Day upon us, however, we’re forced to face the age-old fact that summer inevitably gives way to autumn—and a fall from the summer run-up in home prices. In 2009, Chicago’s five months of spring and summer gains in the Case-Shiller index were followed by a drop in the September data, and prices kept dropping until the next spring-summer rebound. That one, in 2010, lasted five months as well, before September started a string of months with price declines. Spring-summer 2011, the same thing: prices rose every month from May to August. So far this year, the April, May, and June numbers have all shown increases for Chicago. (Case-Shiller data lags two months behind the calendar; the data for September 2012, good or bad, will be out at the end of November.)
Clearly, the Case-Shiller numbers reflect the seasonal nature of home sales: more people shop for homes in summer than winter, so prices here likely have been bid up in each of those spring-summer runs. The question now is, will this year’s upswing prove to be another “dead cat bounce” (as one commentator calls it), followed by yet another gloomy stretch of price declines? Or will this year bring the September to remember, the one that breaks the cycle and extends the upward tilt in prices through a more prolonged string of months?
Zeke Morris, who is president of the Chicago Association of Realtors and a Keller Williams agent in Hyde Park, believes there’s potential to break the cycle. “This is a unique year, where we won’t see the same fall-off,” he predicts. His reasons:
• Investors are doing much of the buying. As many as 60 percent of recent purchases in the city, Morris says, may have been by investors. (There is no official tally.) Investors, he explains, are rushing to capitalize on consumers’ growing interest in renting a home and are snapping up properties they can offer as rentals. Their appetite for properties, he notes, is not seasonal.
• “Never have we had such good prices and terms together,” Morris says, referring to the epochal combination of price drops and low mortgage interest rates that make homes eminently affordable. That combination, he contends, will sustain the interest of the conventional buyers (the noninvestors, who buy for their own use) after summer’s end.
• The number of home sales that are pending—awaiting contract review, mortgage approval, or other green lights—is higher this year than in previous summers. “All that will come through the pipeline later,” Morris says.
• The coming presidential election has many potential buyers holding back. Once the election is decided, Morris forecasts, “you’ll see more folks buying.”
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