It's becoming increasingly difficult to come up with different ways of saying that Chicago area home prices are just not appreciating very fast. This morning's release of the July Case Shiller home price indices by Dow Jones S&P CoreLogic showed a slowing in the nation's home price appreciation and the Case Shiller Chicago home price index was no exception.
Single family home prices for the nation gained 6.0% from last year, which is down from a 6.2% appreciation rate last month. But, once again, Chicago area single family home prices lagged the rest of the nation with a mere 3.0% appreciation, down from 3.3% last month. And Chicago condo prices fared even worse, appreciating by only 2.5%, down from 2.8% last month. That's the slowest rate of appreciation in 3 1/2 years. See the graph below for the historic year over year appreciation rate of the two type of homes in Chicago.
Chicago remains the second slowest appreciating metro area out of the 20 tracked by Dow Jones S&P, ahead of only Washington DC. We may soon even find our home prices declining relative to the price of everything else.
Here is what David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, had to say about slowing home price appreciation:
Year-over-year gains and monthly seasonally adjusted increases both slowed in July for the S&P Corelogic Case-Shiller National Index and the 10 and 20-City Composite indices. The slowing is widespread: 15 of 20 cities saw smaller monthly increases in July 2018 than in July 2017. Sales of existing single family homes have dropped each month for the last six months and are now at the level of July 2016. Housing starts rose in August due to strong gains in multifamily construction. The index of housing affordability has worsened substantially since the start of the year.
Since home prices bottomed in 2012, 12 of the 20 cities tracked by the S&P Corelogic Case-Shiller indices have reached new highs before adjusting for inflation. The eight that remain underwater include the four cities which led the home price boom: Las Vegas, Miami, Phoenix and Tampa. All are enjoying rising prices, especially Las Vegas which currently has the largest year-over-year increases of all 20 cities. The other cities where prices are still not over their earlier peaks are Washington DC, Chicago, New York and Atlanta.
I think he believes that home price appreciation has pushed the limits of what is possible for the time being.
Case Shiller Chicago Area Home Price Index By Month
The graph below shows the historic condo and single family home price index values for the Chicago area going back to 1987. In case you missed it I finally extended the graph back to 1970 but I'm not sure I want to show that on a recurring basis: Chicago Area Home Price Trends From 1970 - 2018.
In July single family home prices gained 0.3% from June while condo prices were flat from last month. As David Blitzer mentioned, we still haven't recovered to our peak prices. Single family home prices are still 13.0% below the peak and condos are 6.9% below the peak. At the current rate it will probably be several more years before we fully recover. In fact, single family home prices are still lower than they were from August 2004 - October 2008 while coondo prices are lower than the period from June 2005 - October 2008
And then there is that trendline for single family homes that I based on the pre-bubble prices. We're still 24.0% below that line with no hope of ever closing in on it. And it's not like that trendline sets an unreasonable target either. The underlying growth rate is 3.7% per year, which is well below the rate that the rest of the country has been experiencing lately. In addition, as I pointed out when I extended the price history back to 1970, our growth rate for 29 years averaged 6.1%.
However, we have made substantial progress from the depths of the housing crisis. Single family home prices have risen 41.2% while condo prices have risen 54.1%.
Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. 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.