Chicago-area sales of existing homes and condos fell 14.5 percent in July compared to the same month last year, but median prices rose 2.6 percent, according to the Illinois Association of Realtors.
Nevertheless, single-family home sales in the Chicago area fell by 18.6 percent in July compared to last year at this time.
Even with the Chicago-area single-family home sales falling, median prices rose 4.2 percent, to $285,000. (Daily Herald 8/24/06)
So what will happen with housing prices during the coming years?
Overall I do not think the Chicago metro area is a bubble market. The typical housing unit is unlikely to decline in price by 20% in real dollars during from its peak price within 3 years of peak price. However, condos especially in the city itself are likely to fall by over 20% in real dollars. Certain 'hot' neighborhoods that have experienced very strong price appreciation may fall more then 20% in real dollars over the course of 3 years. Chicago, is certainly not bubblicious like San Diego, nevertheless declining real dollar prices will be a reality for the Chicago metro area in the coming years.
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I've been reading your posts for a while now, and I'm looking for some clarification on something.
ReplyDeleteYou say that you do *not* think the Chicago area is a bubble market in terms of a "typical" housing unit. Yet you say that condo prices will generally fall 20% in real terms. If that isn't a bubble market, what is? Especially since Chicago is indeed a dense city and condos comprise the bulk of the housing in downtown Chicago proper.
btw: I lived in Chicago in 2000 (condo in River North), and I thought it was a bubble back then with all the new condos coming online. Are you lumping the outlying areas of Chicago in with the downtown area? Sort of like people saying that Silver Spring is "in DC"?
A guy in MD asked me recently "Where you from?" when I walked into his place of business.
ReplyDeleteI replied: "Washington DC". He said: "Where abouts? Silver Spring?" LOL. I said "No, Washington DC."
He seemed confused and I walked away.
Where has Sarah in Ballston been lately?
An interesting side effect of the rise in Chicago metro prices has been the rise in Milwaukee (about 90 mins north, for you non-hosers)
ReplyDeletecondo prices, particularly in the recent construction by the River. It seems a lot of Chicagoans and suburbanites like the lower prices and the easy Lake Michigan access. To me, it seems like an expensive way to buy a dock.
Anyway, I also expect a downturn there. I hope the midwestern virtues have not completely disappeared; if not, they'll be fine.
anon,
ReplyDelete"Yet you say that condo prices will generally fall 20% in real terms. If that isn't a bubble market, what is?"
Yes that would be a bubble.
"Are you lumping the outlying areas of Chicago in with the downtown area? Sort of like people saying that Silver Spring is "in DC"?"
No. What I am saying is that sub segments of the Chicago metro area housing market are indeed bubblicious (real dollar declines of greater then 20%). However, overall the average housing unit in the metro is unlikely to fall by greater then 20% in real dollars.
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ReplyDeleteMr. Lereah, you have already been warned about your language. Truth hurts?
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