Case Shiller: Chicago Condos Show Weakest Price Gains In Almost 4 Years

Case Shiller: Chicago Condos Show Weakest Price Gains In Almost 4 Years
The Case Shiller Chicago home price index shows
slowing appreciation in the city and the country.

Dow Jones S&P CoreLogic just released their November Case Shiller home price indices and they show further slowing in price appreciation for both the nation and the Chicago area. For single family homes year over year appreciation in the Case Shiller Chicago index slowed only slightly to 3.1% vs. 3.3% in October. However, broader measures of single home price appreciation fared worse. The 10 city composite index declined to 4.3% from 4.7% in October and the 20 city composite slowed to 4.7% from 5.0%. The nation as a whole did a bit less bad though, declining from 5.3% in October to only 5.2% in November.

The Chicago area still ranks 2nd from the bottom of the 20 metro areas in terms of single family home price appreciation. But it looks like the gap between the rest of the nation and the Chicago area is slowly closing as the rest of the nation slows down more than Chicago.

However, the story is a bit worse for Chicago area condos. Look closely at the graph below, which shows year over year home price appreciation for both single family homes and condos. The year over year condo price appreciation slowed to a mere 1.6% in November compared to 2.6% in October. That was the lowest annual appreciation rate in almost 4 years. Unfortunately, there are no larger geography indices for condos like there are for single family homes so I don't know how we compare to the rest of the country.

I find this dramatic decline in price appreciation slightly odd in that condo inventories are still pretty low in Chicago despite rising recently. Granted that the Chicago metro area is more than just the city but still...most of the condos are in the city.

Case Shiller Chicago Year Over Year

Chicago area home prices have shown annual gains for 72 consecutive months.

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, tried to explain what's going on as follows:

The pace of price increases are [sic] being dampened by declining sales of existing homes and weaker affordability. Sales peaked in November 2017 and drifted down through 2018. Affordability reflects higher prices and increased mortgage rates through much of last year...Current low inventories of homes for sale – about a four-month supply – are supporting home prices. New home construction trends, like sales of existing homes, peaked in late 2017 and are flat to down since then.

But the question is why are sales declining? Is it weaker affordability or is it low inventory levels? If it's low inventory levels then that shouldn't be holding further price appreciation back. Also, if inventory is low (it is) why is new home construction down? I'm so confused.

Case Shiller Chicago Area Home Price Index By Month

We're at the time of the year when home prices decline month to month. Single family home prices fell by 0.7% from October to November and condos fell by 0.6%. I've graphed the monthly Case Shiller Chicago area home price index values for both single family homes and condos going back to 1987 below and you can see the wiggles from the seasonality. I've also added a red trend line for single family homes based upon the period prior to the housing bubble.

The first thing you notice is how we still haven't returned to the bubble peak. In fact single family home prices are still 14.9% below the peak while condos are 7.8% below the peak. Another way of looking at that is that single family homes are still lower than they were during the entire period from July 2004 - October 2008 and condos are still below their May 2005 - November 2008 prices.

The other disappointment is that, despite overshooting the trendline during the bubble peak, we never caught back up to it. We are now 25.7% below the line and it looks like the gap is just getting wider and wider. Nevertheless, we have made a lot of progress from the bottom with single family homes bouncing back 39.7% and condo prices rising by 52.5%.

Case Shiller Chicago

Chicago area home prices still have a way to go before catching up to the bubble peak.

#ChicagoHomePrices #CaseShiller

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.

Enter your email address:Delivered by FeedBurner

 

Leave a comment