Case Shiller's release this morning of the November home price index for Chicago showed another record month relative to last year. Sure the index was down a bit from October but that is normal for this time of the year. What was more interesting was the fact that it didn't decline as much as it did last year. So that leaves this November's single family home prices 11% higher than a year ago - once again the highest year over year increase in 25 years. Condominium prices were up 14% over last year - a very strong growth number but not a record like October.
This strong price performance should be no surprise given the extremely low inventory levels that we've been working with for the last year or so. Yet Chicago still lags 11 out of the 20 cities tracked by the Case Shiller index in year over year growth. Some of those cities, like San Francisco, Las Vegas, and Los Angeles, are actually seeing year over year growth above 20%. It's crazy but understandable, given how far some of those markets fell and how much growth some are experiencing.
As I mentioned above home prices did actually decline a bit from October's levels but that's totally normal. Single family homes dropped by 1.2% while condominium prices dropped by 1.0%. Where we ended up was at levels for single family home price levels similar to the November/ December 2002 time frame and condominium price levels similar to October 2002. But for perspective look at the graph below and keep in mind that single family home prices are at their highest levels of the last 4 years and condominium prices are at their highest levels of the last 3 1/2 years.
Single family home prices have risen a total of 22.5% from their March 2012 lows while condominium prices have risen a total of 30% from their lows. However, single family home prices are still 25.3% below the bubble peak and condominium prices are still 21.4% below their peak. And if you believe in long term trends it's useful to note that single family home prices are 21.9% below that red trend line in the graph below.
Here are a few of the more interesting snippets from David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices commenting on the national picture for home prices in today's release:
...the 10-City and 20-City Composites showed their best November performance since 2005.
Beginning June 2012, we saw a steady rise in year-over-year increases. November continued that trend with another strong month although the rate of increase slowed.
Home prices continue to rise despite last May’s jump in mortgage interest rates. Mortgage applications for purchase were up in recent weeks confirming home builders’ optimism shown by the NAHB survey. Combined with low inflation -- 1.5% in 2013 – home owners are enjoying real appreciation and rising equity values. While housing will make further contributions to the economy in 2014, the pace of price gains is likely to slow during the year.
With inventory levels as low as they are it's entirely possible that Chicago will continue to see strong price gains during the next 12 months unless a bunch of sellers get out there in the next couple of months. It's going to be an interesting year.
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