On Tuesday, the latest data from the Case Shiller Index showed that among the country’s 20 largest cities, Chicago-area home values for November 2010 took the second-largest fall from the year before. Prices were down 7.6 percent from November 2009; only Atlanta, at 7.9 percent, fell further.
With home prices here stuck for most of the past year at 2002 levels (the latest drop took them back to the early months of that year), it’s no surprise that about 150 real-estate agents converged on the Holiday Inn Mart Plaza for the Chicago Association of Realtors’ (CAR) annual economic forecast last Thursday, each of them eager for insights into what might happen in 2011.
The answer? Not much. The consensus at the panel discussion (which I moderated) was that scattered positive signs—such as the rush of business that several agents tell me they experienced in December as on-the-fence buyers responded to an uptick in interest rates—aren’t enough yet to overcome the burdens dragging down the real-estate market. Those include slow economic growth, hesitant consumers, the continued flow of foreclosures onto the real-estate market, and, in Illinois, recently increased taxes. “In housing, it’s ‘wait until next year’ again,” said the DePaul University economist Michael Miller. The reason: “The economy is just ho-hum.”
While the economy is growing again slowly, Miller said, the new job creation is barely enough to accommodate newcomers (such as recent graduates) into the job market. The unemployed, he said, aren’t being absorbed and may not be for a while. Mabel Guzman, CAR’s president, concurred that Illinois’ stubborn unemployment rate, still over 9 percent, “is without question a factor. We are not seeing enough job creation to lead to gains in real estate.”
Many people “are concerned about debt and unemployment,” Miller added, so they are timid about buying a house unless they really have to move. And while it’s true that much of the country is struggling financially, Miller noted that Illinois residents took a new punch to the wallet with the state’s increase in the income tax. “If you want to stimulate the economy, the wrong thing to do is to raise income-tax rates,” he said, suggesting that, instead of calling itself the Prairie State, Illinois might consider going with the Pray for Me State.
Chicago’s real-estate market showed some signs of stabilizing in the latter part of 2010, insisted Russ Haraus, the vice president and manager of the single-family division of Appraisal Research Counselors. But he warned that any stability “will be difficult to maintain throughout the first and second quarters of 2011” because the sales of foreclosed and short-sale properties have started up again after they were halted in 2010 because of concerns about processing errors. Rock-bottom foreclosure prices bring down the potential sale price of neighboring homes, he noted, and also contribute to declining consumer optimism.
Joe Cosenza, the vice chairman of Inland Group Real Estate Companies, summed up the ambivalence of all the speakers when he said, “To me, it’s not positive when all you’re talking about is less negative.” But, he conceded, this is pretty much the reality for the coming year.