Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=118429
Story Retrieval Date: 8/30/2014 3:23:25 AM CST
Mirroring the national trend, the state’s January existing-home sales fell 23.9 percent to 4,599 from 6,045 in the same period last year, according to an Illinois Association of Realtors report released Wednesday. Statewide existing-home sales were down 30 percent from December.
The city of Chicago saw a similar decline of 23.5 percent, to 888 homes from 1,161, compared with last January – but the drop from December was even worse at nearly 27 percent. The report comprises sales of single-family homes and condominiums.
Industry experts said the poor sales in Illinois and Chicago are just one more symptom of the economic malaise infecting the entire country. The National Association of Realtors reported Wednesday that January existing-home sales fell 5.3 percent from last month and 8.6 percent year-over-year to 4.49 million from 4.91 million.
Economists surveyed by Bloomberg LP expected to see 4.79 million January existing-home sales.
“The housing crisis is hitting Illinois a little later than other parts of the country, but now we’re feeling it,” said John McDonald, professor and dean of economics at the University of Illinois at Chicago.
Compared with last January, Midwest regional sales of existing homes fell 16.7 percent, Northeast sales tumbled 23.8 percent and sales in the South dropped 7.4 percent. Sales rebounded 29 percent in the West, where home prices dove a quarter below January 2008 levels.
From December, existing-home sales were down 5.7 in the Midwest and South, while Northeast sales dropped 14.7 percent. The West saw no change in its sales.
McDonald blamed poor consumer confidence for the depressed figures.
“People may be skittish about going into the housing market until they see the market stabilize,” he said.
The impact of the battered economy could also be seen in lower median home prices, which reflect the value where half the homes sold for more and half sold for less. The Illinois median home price in January was $149,000, nearly 20 percent below the $186,500 reported in the same period last year. Median prices in the city of Chicago were down nearly 29 percent to $206,250.
Chief Economist Lawrence Yun of the National Association of Realtors said in a statement that sales of foreclosed properties are driving down prices in many parts of the country, although he estimated that foreclosed existing-home sales make up less than 20 percent of all sales in the Chicago region.
Stephen Baird, CEO of Baird & Warner Inc., a Chicago-based real estate broker, said that Chicago home prices have been falling since before last summer, but buyers may be holding out for even better prices.
People interested in buying a house are probably thinking, “I’ll be able to buy a house for X dollars less if I wait,” Baird said. “It’s human nature.”
Baird questioned if the $8,000 first-time homebuyer tax credit included in President Obama’s stimulus package will make a difference. A similar tax credit was offered last year, Baird noted, but there was little impact on Chicago home sales.
More importantly, people aren’t secure about their jobs and finances right now, and they’re not confident making big purchases for homes, cars or vacations, Baird said.
Edward Stuart, professor of economics at Northeastern Illinois University, said inflated housing prices will continue to suppress home sales and prevent a short-term rebound in the housing market.
“Prices have a long way to go in terms of reaching normal real estate [values],” Stuart said, adding that Chicago home prices may be less inflated than in other parts of the country as “prices didn’t go up as much in ’06 and ’07, so there’s not as much room to drop.”
But economists and real estate brokers agree that the housing market slump won’t turn around until unemployment rates improve, consumers regain their financial confidence and the number of homes available for sale – 3.6 million throughout the nation – declines.