I’ve been having an ongoing debate for quite some time now with Sabrina, the proprietor of CribChatter, regarding whether or not Chicago home prices are “well past peak” in Chicago’s more affluent neighborhoods. She contends that prices have soared past the bubble peak and I claim they have not. Each of us has our own anecdata to prove our own points.
So I wanted some way to look at more comprehensive data to prove that I was right figure out what was really going on. Unfortunately, there isn’t much Case Shiller data available at the neighborhood level and it’s really hard to get your hands on it. So I turned to the next best thing: median and average home sale price trends.
However, as I’ve pointed out on numerous occasions, the problem with those metrics is that if the mix of what is selling changes over time – e.g. more large or really nice homes – then you will see a change in those metrics even if underlying prices aren’t changing. But then it dawned on me that if I just focused on a very specific segment of the housing market and since I was going to look at specific neighborhoods this problem would be minimized if not eliminated entirely.
So I set out to analyze 2 bedroom condos, which is where the bulk of the condo market is, in both Lake View and the Near North Side. In my debates with Sabrina I draw most of my anecdata from Lake View and she draws most of hers from the Near North Side.
First, I looked at median sales prices, which denotes the price where half the sales occur below it and half occur above it – like the 50 percentile point. And I looked at a 12 month moving average so as to smooth out the noise and also allow us to “look back” 12 months before the earliest date on the graph.
As you can see in the graph below we have not quite hit the bubble peak again so prices are clearly not “well past peak”. Despite the shortcomings of looking at median sales prices I think it’s safe to say that IF home prices had really surged past the peak it would be damn near impossible for the median sales price graphs to look like they do below. Just to show you the key numbers behind these graphs the median sales price peaked in the Near North Side at $499K and only hit $483K last month. Similarly the median sales price peaked in Lake View at $374K and only hit $350K last month.
But what about the average sales price graphs? Check them out below. They have the same basic shape but there are some subtle differences. The average sale price in the Near North side peaked at $563K but recently hit a new peak at $589K, although it has recently pulled back a bit with February at only $574K. On the other hand the average sale price in Lake View peaked at $376K but has since only gotten as high as $364K.
I don’t think this data makes a very strong case either for prices having surged “well past peak”. But it might shed some light on how Sabrina may get this impression. Obviously Near North Side average selling prices are a tad higher than they were at the bubble peak. Also, note that the relationship between the Near North Side’s average and median graphs suggests that the Near North Side’s price distribution has more of a skew to the upper end than Lake View’s distribution AND that those condos have appreciated more than ones at the lower end. So, if Sabrina is focusing primarily on high end units on the Near North Side and I’m looking at Lake View she is much more likely to conclude that prices are “well past peak” than I am.
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Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. 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.