Yes, this morning’s release of the Case Shiller home price index for February showed prices continuing to decline from the previous month but that is totally normal for this time of year. What is more interesting is the price change relative to last year at this time and of course the index numbers specifically for Chicago. And when you look at the price change for Chicago condos (and townhomes) the story gets even more interesting.
The graph below tracks the year over year price changes going back to the beginning of the index. Case Shiller started tracking condo prices much later in the game. But as you can tell condo prices have been really taking off lately and for February they are now tracking 17.1% above last year – the highest year over year change on record. Meanwhile, single family home prices are still nicely in positive territory but their growth rate is slowing – 10.7% vs. a recent peak of 11.3%.
It’s actually hard to make too much out of this picture because there really are a lot of month to month fluctuations in the numbers and condo prices in Chicago were falling pretty hard at this time last year.
You can see the long term picture for both indices in the graph below. In February single family home prices fell 0.9% from January while condo prices fell 1.6%. As you can see we’re still really far below the peak values. Single family home prices have fallen a total of 27.3% and condo prices have fallen 24.8%. However, we have recovered quite a bit of lost ground from the bottom – single family home prices are up 19.3% and condo prices have risen 24.4%.
Single family home prices are also 24.6% below the long term trend line in the graph below and we’re only catching up to that trend line veeeeeerrrryyyyy sloooowwwwwly. This seems to be consistent with the fact that Chicago is lagging the rest of the country in terms of how fast it’s housing market is recovering. For instance, we are behind 13 of the 20 metro areas tracked by Case Shiller in terms of our year over year price increase.
So where does this leave Chicago homeowners? The average home buyer who bought a single family home in July 2002 as prices were rising or in March 2009 as prices were falling is basically back to where they started. For the average condo buyer those dates are May 2002 and October 2010.
In today’s release David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, commented on the price changes at the national level in the context of otherwise blah housing satistics.
Despite continued price gains, most other housing statistics are weak. Sales of both new and existing homes are flat to down. The recovery in housing starts, now less than one million units at annual rates, is faltering. Moreover, home prices nationally have not made it back to 2005. Mortgage interest rates, which jumped in May last year and are steady since then, are blamed by some analysts for the weakness. Others cite difficulties in qualifying for loans and concerns about consumer confidence. The result is less demand and fewer homes being built.
Five years into the recovery from the recession, the economy will need to look to gains in consumer spending and business investment more than housing. Long overdue activity in residential construction would be welcome, but is certainly not assured.
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