Despite a real estate market with really short market times that leaves homebuyers scrambling for opportunities the Chicago area's home prices continue to struggle to rise in line with the rest of the nation. This major head scratcher is evident from the latest Case Shiller Chicago area home price index for single family homes which shows a mere 3.3% year over year gain. The June Case Shiller home price indices just released by Dow Jones S&P CoreLogic has their 20 city composite growing by 6.3% - almost twice as fast. Home prices in cities like Las Vegas, San Francisco, and Seattle are growing in the double digits. Only Washington DC is doing worse than Chicago with a 2.9% gain. This is why Chicago home prices are such a bargain by urban standards.
The graph below shows the history of the Chicago area's annual home price appreciation and includes condo prices, which were up a mere 2.8% over last year. There are a couple of interesting things to note in the graph. I guess it's good news to report that home prices have been appreciating now for 68 consecutive months. Also, this June data is the first time in 42 months that single family home prices have risen faster than condo prices on a year over year basis. In fact, the annual appreciation of Chicago condo prices is at it's lowest level in 29 months. This is kinda, sorta consistent with the fact that condo inventories have been rising lately. Then again they are still pretty low.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, is cautioning that there are dark clouds forming overhead:
...even as home prices keep climbing, we are seeing signs that growth is easing in the housing market. Sales of both new and existing homes are roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some markets. Rising mortgage rates – 30 year fixed rate mortgages rose from 4% to 4.5% since January – and the rise in home prices are affecting housing affordability.
He goes on to briefly discuss the drivers of home price appreciation but I would expect those same factors to be powering Chicago area home prices higher than they are:
The west still leads the rise in home prices with Las Vegas displacing Seattle as the market with the fastest price increase. Population and employment growth often drive homes prices. Las Vegas is among the fastest growing U.S. cities based on both employment and population, with its unemployment rate dropping below the national average in the last year.
Case Shiller Chicago Area Home Price Index By Month
Now that I have updated my historic Case Shiller Chicago area graph below I realize that I still haven't attempted to extend it back to 1970. I need to get on that. But in the meantime note that single family home prices for June rose by a paltry 0.8% from May and condo prices rose by a mere 0.5%.
Probably the most prominent feature of this graph is the fact that home prices still haven't recovered to the bubble peak. Single family home prices are still 14.2% below the peak and condo prices are 6.9% short. Another way to look at it is that single family home prices are lower than they were during the entire period from August 2004 - October 2008. Condo prices are lower than the period from June 2005 - October 2008.
Also notable is the fact that we appear to be falling farther and farther behind where the pre-bubble trendline is. Right now we are 24.0% below it.
But we have made a ton of progress from the bottom. Single family home prices have recovered 40.8% and condo prices have bounced back 54.0%.
Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.