Case Shiller: Chicago Home Prices Just Puttering Along

The April Case Shiller Home Price Index data just came out from the Dow Jones Index folks and it was kind of…meh…Sure Chicago home prices still went up from March but that tends to happen at this time of year and they are up year over year – but nothing like last year when they were advancing by double digits. The year over increase for April was actually lower than the last couple of months also.
Single family home prices in Chicago were up only 2.5% in the last year while condo prices were up 4.2%. Looking at the long term picture in the graph below you can see that the recent annual price increases are in line with the pre-bubble period, but at the lower end of that range. But then again inflation was a bit higher back in those days so you would expect that to put upward pressure on home prices.
When compared to the other 19 metropolitan areas that Dow Jones reports on Chicago is 4th from the bottom in terms of year over year gains. Is that a temporary phenomenon and we’re going to eventually catch up or is our economy just not doing as well as those other cities? Can you say “budget problems”?
Case Shiller Chicago Year Over Year
The graph below shows the long term trend in Chicago area single family and condo prices along with the trend line based upon the pre-bubble time period. Even though we’ve gained a lot of ground since the bottom of the market you can see that the gap is widening between the long term trend line and current prices. As I mentioned above this is in part related to the fact that inflation is just not what it used to be.
Let’s look at the numbers for April. Single family home prices were up 1.1% over March while condo prices were up 1.4%. So single family home prices have now bounced back 25.7% from the bottom but are still 23.4% from their peak. Condo prices have bounced back 33.4% but are 18.2% from the peak. And the distance from that trend line that I mentioned…we’re now tracking 23.9% below it.
Putting this in a historic perspective single family home prices were, on average, higher than where we are now during the period from April 2003 through January 2009. Condo prices were higher from June 2003 through January 2010.
Case Shiller Chicago
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices made many of these same points in his monthly commentary:

Home prices continue to rise across the country, but the pace is not accelerating. Moreover, consumer expectations are consistent with the current pace of price increases. A recent national survey published by the New York Fed showed the average expected price increase among both owners and renters is 4.1%. Both the current rate of home price increases and the consumers’ expectations are a bit lower than the long term annual price change of 4.9% since 1975. These figures, however, do not adjust for inflation. The real, or inflation adjusted, price change since 1975 is one percent per year. Given the current inflation rate of under two percent, real home prices today are rising more quickly than is typical. The three out of five consumers in the survey who see home ownership as a good or somewhat good investment may be thinking in real terms.

The only thing is that I don’t think the typical consumer can think in real terms. They don’t even know what real terms are. But his point is that home prices are actually advancing quite well given where inflation is.
#CaseShiller #Realestate #HomePrices
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