Does the end of housing tax credits mean the end of Chicago housing recovery?

I write a lot about the Washington, D.C. housing market. I used to write frequently for the Washington Post’s real estate section. Today, I contribute posts to a DC real estate agent’s blog. It’s a nice place to write about because it’s one of the stronger housing markets in the nation, even with the housing slump.

I feel the same way about Chicago. The city has a lot going for it: great entertainment, restaurants, shops, parks and a diverse housing stock. Neighborhoods like Lincoln Square, Lakeview, Lincoln Park and Ravenswood on the North Side have all survived the housing slump pretty well, all things considered.

But even strong markets are going to see housing sales slip in the next few months. Why? The housing tax credits — the one that provided an $8,000 tax credit for buyers who purchased their first homes and the one that gave buyers of other homes a credit of $6,500 — both expired at midnight on April 30.
It’s little surprise, then, that Chicago saw such a boom in condominium and housing sales in April. You can read the figures in this press release provided by the Illinois Association of Realtors. Basically, though, the association reports that home sales in Chicago rose 41.1 percent when compared to April of 2009.

That’s good news. But how many of those home sales came because buyers were rushing to beat the April 30 tax-credit deadlines? My guess? A lot of them.

It doesn’t take much effort to find quotes from real estate agents here worried that the end of the tax credits will mean a slowdown in home sales. I agree with them.

I did ask a real estate agent in Chicago whom I’ve interviewed several times about this. He told me that he’s absolutely certain that we’ll see a drop in home sales in May, June and July, even though these are traditionally busy months for Chicago home buyers and sellers.

Did the housing tax credits create a bit of artificial demand for Chicago housing? Probably. But you can’t argue that it did spur sales here. Now we’ll just have to prepare ourselves for a bit of a slowdown.

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