President George W. Bush launches the Department of Homeland Security, Denzel Washington and Halle Berry take home best acting Oscars, and 12 European countries adopt a new currency called the euro. Welcome to 2002.
At least that’s how it must feel to many local residents as home values here hover at about the same point they were in the second year of the new millennium. For much of 2010, the Case-Shiller index, a reliable gauge of home values, has been reporting sales figures for the Chicago area that are the same as it showed in 2002.
Of course, that is a regionwide measure. Chicago’s annual real-estate charts (which begin on page 84) don’t send every local community back to 2002, but the charts’ statistics do echo Case-Shiller in some places. In the O’Hare neighborhood, on the Far Northwest Side, for instance, Chicago’s October 2002 chart showed an average home-sale price of $319,800; this year, it’s $318,042. Eight years ago, condos in Rogers Park were averaging $160,145; they climbed to a peak price of $231,801 in 2007, but this year they are back down to $164,131, only 2 percent above their 2002 level. In the suburbs, the average 2010 prices in about a dozen towns (including Gurnee, Homewood, Kenilworth, Niles, and Riverwoods) are within a few percentage points above or, more commonly, below their 2002 counterparts.
Declines in home values are evident throughout this year’s charts, which track local home sales from July 1, 2009, to June 30, 2010, in 288 neighborhoods and suburbs. In 148 of those communities, the average sale price of single-family homes dropped by more than 10 percent when compared with last year—and in 26 of those suburbs and nine neighborhoods, the drop was larger than 20 percent. Of course, that followed big price decreases over the past two or three years.
A few locations did see their average sale prices go up, but those increases were essentially compensatory. Only 13 suburbs and 11 city neighborhoods enjoyed increases of more than 1 percent (below that, it’s more accurate to say that prices were flat), and virtually every one of those communities had endured some of the bigger drops in our 2008 and 2009 charts. For instance, Avalon Park, on Chicago’s South Side, saw prices go up by 14.01 percent this year—but the neighborhood experienced a 35.6 percent drop last year and a 16.86 percent drop the year before that. In the northern suburbs, Lincolnshire is up by nearly 7 percent this year but dropped 26.23 percent last year. The story is the same in about 20 other locations, where prices have gone up, yes, but from way, way down.
Chicago’s data, which extend back to 1994, reveal several places where homes are selling not only below their 2002 prices but also below their 1994 prices. They are largely moderate- and low-income communities—among them, Burnham, Calumet City, and Maywood in the suburbs, and Englewood and Roseland in the city. Job losses and the foreclosure crisis hit these areas especially hard, and residents there with few other resources can hardly afford another setback. (During the next few weeks, I will more closely examine data from the charts in the Wednesday “Housing Bulletin” at my thrice-weekly blog at chicagomag.com/dealestate.)
While prices are down, the number of home sales is up in the majority of the towns and neighborhoods on the charts. That’s a point not to be overlooked: Houses are still selling, and in fact this year they sold in larger numbers than last year. In the six-county metropolitan area, 77,792 homes were sold from July 1, 2009, to June 30, 2010, according to Midwest Real Estate Data (MRED), which provided the information for our charts. That’s a 29 percent increase from last year. Each one of those sales potentially provides a small boost to the sputtering economic recovery, with attendant purchases such as new rugs, lamps, and other furnishings.
And who could blame a homebuyer for splurging a bit on décor when the house itself came at such an attractive price? Low prices and cheap mortgages have made this a fantastic year for buyers—that is, if they could get a loan. Next year, conditions may be even better for buyers if there are further drops in the market.
Bargain-basement deals have attracted buyers at all price points—and in all neighborhoods. In the spring, Ron Huberman, the CEO of the Chicago Public Schools, paid $898,000 for a house in Chicago’s Lincoln Square that had previously been mortgaged for about twice that amount. Tom Waddle, the Fox Chicago sports analyst and former Chicago Bear, bought a new house in Lake Forest for $3.25 million—only 48 percent of the $6.7 million that the home’s builder had originally wanted for the place.
In communities where there have been numerous foreclosures and distressed sales, the charts may paint a bleaker picture than actually exists for the financially stable homeowner who’s not looking to sell. In August, the Chicago Tribune’s Mary Ellen Podmolik reported that 35.2 percent of home sales in Cook County during the first quarter of 2010 were foreclosure related. She noted that research from the Cook County assessor revealed that, while the countywide median sale price had dropped by 21 percent, prices in the “pure,” or nondistressed, market were down by only 6.7 percent.
Chicago’s charts do not separate distressed properties from other sales. MRED does not make that distinction. More important, if you are planning to sell these days, there are foreclosures and short sales occurring in almost every community, and those distressed sales—usually at lower prices—will be in competition against your sale.
What’s to come? Nobody is certain, but by late summer, suggestions of further declines were gathering. In late August, the Illinois Association of Realtors released data showing that the number of home sales in the Chicago area had declined by 25.1 percent in July (a drop not reflected in the time span of our charts). The association attributed the decline, in part, to the end of the government’s homebuyer tax credit. With that in mind, the best plan for homeowners might be to hunker down, bide their time, and convince themselves that 2002 wasn’t such a bad year after all.
Illustration: Mario Wagner