Hey - where's the bottom of the housing market? Precisely, now, when will it occur? Or, has it occurred already?
In Chicago - we don't know when it will bottom, and all indications are it has yet to happen. Things are brightening up a bit here, it seems, but we still have a way to go.
Across the country, sales of existing homes rose 3.1% for July, 2008, versus June - to an annualized rate of 5 Million Units, from 4.86 Million Units the prior month. However, the national inventory of homes for sale increased 3.9%, to 4.67 Million - an all-time record! The National Association of Realtors pegs the inventory at an 11.2 month supply - nearly double the approximate 6-month "balanced inventory" level.
Here in Chicago, in the North and Northwest Side Neighborhoods we serve most often, recent inventory levels exceeded 28 months! (See our latest Chicago IL Real Estate Stats Pack for more data).
Data from the latest S & P/Case-Shiller Index of Home Prices indicates a drop in Chicago Metro Area Home Prices of 9.5% through the end of June, 2008, from last year. These dropping prices may be further holding back home sales, as many buyers are still waiting on the sidelines for prices to drop even more.
Many other buyers would like to purchase, but can't get approved for financing, as lenders have considerably tightened their standards for financing a home. Here at Dean's Team Chicago, we have encountered five such would-be buyers in 2008 alone!
Although basic supply and demand economics suggests rising inventories would drive down home prices, many experts feel prices have to fall back even more for demand to strengthen, and prices to stabilize.
As we mentioned, mortgage money is getting tougher and tougher to find, as lenders and Private Mortgage Insurance Companies have increased credit score and down payment requirements.
To make matters worse, the Chicago Metro Area, as well as many other metros across the U.S., are defined as "Declining Markets"by PMI Companies. Often, at the last minute before the closing, buyers are often asked to come with an additional 5% down payment as a "Declining Market Premium".
A flagging U.S. Economy and weakened employment picture is adding to housing market woes. Non-farm monthly payroll figures have fallen seven consecutive months. All the while, average 30-year fixed mortgage rates had crept up to 6.43% at the end of July, versus a 6.32% average fixed interest rate at the end of June.
So where are we headed, and when will it end? If you're thinking of a return to 2005-06 housing market buoyancy - perhaps not for a while!
See our post at BlogChicagoHomes.com for more information, as well as several Wall Street Journal links from yesterday's online edition that will shed more statistical light.
DEAN & DEAN'S TEAM CHICAGO