Dow Jones S&P CoreLogic just came out with the September Case Shiller home price indices for the top 20 metro areas and the nation as a whole. While year over year home price appreciation is slowing for the rest of the country the Case Shiller Chicago area index for single family homes is holding fairly steady at around 3.0%. Actually, August was 2.9% so it actually ticked up a bit. Condo/ townhome appreciation in the Chicago area was lower once again at 2.5%. You can see all this in the graph below.
But the Chicago area remains in third from last place among the top 20 metro areas for home price appreciation - ahead of just New York and Washington DC. And I don't expect either of those two areas to stay at the bottom once Amazon starts hiring.
However, on a relative basis the Chicago area looks like it's getting less bad because the rest of the country is starting to slow down. For the second month in a row the annual rate of home price appreciation fell. The national average fell to a 5.5% year over year gain, down from 5.7% in August, and the 20 city composite fell to 5.1% from 5.5%.
Given that Chicago has been lagging the rest of the country for some time I wouldn't expect it to slow down from here. Inventories are still pretty tight and market times have not gone up much at all. So it's possible that Chicago will rise from it's 3rd from the bottom ranking just because everyone else is getting worse.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, blames the slowdown on mortgage rates for lack of a better scapegoat:
The S&P CoreLogic Case-Shiller National Index showed a 5.5% year-over-year gain, weaker for the second month in a row as 16 of 20 cities showed smaller annual price gains. On a monthly basis, nine cities saw prices decline in September compared to August. In Seattle, where prices were rising at double-digit annual rates a few months ago, prices dropped last month. The few places reporting larger gains including some of the cities which had the biggest gains and largest losses 10 years ago: Las Vegas, Phoenix and Tampa.
Sales of both new and existing single family homes peaked one year ago in November 2017. Sales of existing homes are down 9.3% from that peak. Housing starts are down 8.7% from November of last year. The National Association of Home Builders sentiment index dropped seven points to 60, its lowest level in two years. One factor contributing to the weaker housing market is the recent increase in mortgage rates. Currently the national average for a 30-year fixed rate loan is 4.9%, a full percentage point higher than a year ago.
Personally, I don't buy into the idea of linking home sales to home prices. Can't you have rising or falling home prices regardless of the transaction volume? In fact, tighter inventories could result in both higher prices and lower volume.
Case Shiller Chicago Area Home Price Index By Month
We're getting into the time of the year when home prices decline (you can see the seasonality in the graph below) so it's no surprise that single family home and condo/ townhome prices in the Chicago area each fell by 0.1% in September. If you look at the graph carefully you'll see that the gap is widening between where we're tracking and that red trendline I created off of the pre-bubble data. In other words home prices are not appreciating as fast as they have historically and we are currently 24.4% below the trendline.
And, although single family home prices have bounced back 41.3% from the bottom and condo prices have bounced back 54.1%, we are still a bit off of bubble peak prices. Single family home prices fall short by 13.9% and condo prices are 6.9% below the peak.
In fact, single family home prices are still below where they were during the entire period from August 2004 - October 2008 and condo prices are below their July 2005 - October 2008 levels.
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.