Well, it had to happen eventually. The April Case Shiller home price indices for Chicago just came out a few minutes ago and finally they show an improvement after 6 months of declines.
The indices for single family homes and condos originally appeared to be turning the corner in May of last year but then started to head south again. This is the first signs of a rebound since. Could this be the beginning of the end for the housing crisis in Chicago? I called the bottom last year and was wrong.
Single family home prices are now down only 1.5% from last year but just wait until we start comparing ourselves to the higher prices that occurred during the head fake. Prices are now down a total of 28.6% from the bubble peak, which puts them back to May 2002 levels. Meanwhile, condo prices are down 22.5% from the peak, or about July 2002 levels.
The graph above has a trendline in red that represents the more “normal” single family home price appreciation in Chicago (not enough data to do that for condos). Based upon that line we are currently 15% below where we “should” be.
Gary, if there were to be another tax credit and you were in charge, how would you write it?
I guess I wouldn’t. Personally, I don’t believe the government should be trying to manipulate the housing market. It’s a futile effort. All they’ve accomplished is shifting demand forward. In fact, I’m not even a fan of the mortgage interest deduction. I think we are one of only 2 nations in the world that subsidize mortgage lending in this way.
But if we had to have another tax credit I would make it as small and short as possible.
However, let me be clear that I am a big fan of my clients taking advantage of whatever laws are in place.