Over the last week a number of Chicago area real estate statistics came in that reinforce the fact that the market here continues to deteriorate like other parts of the country. Here is a brief summary:

• 4th quarter sales for the city of Chicago declined by 29% from 2007, dropping to 1994/1995 levels. The drop was most significant for condo sales.
• December sales for the Chicago PMSA (primary metropolitan statistical area) came in 16% below December of 2007, which was already 33% below 2006. The decline has slowed somewhat in the last few months.
• The Case Shiller index that tracks home prices (much more accurately than the median prices reported by the real estate organizations and the media) shows that prices in November were down 12.5% from the previous year, are down a total of 16% from the peak, and are back to May 2004 levels.

In light of all this The Chicago Tribune ran a story today about how sellers are finally capitulating and dropping their sales prices.

The NAR has recently released their newest (and totally unbiased I am sure) advertising campaign. The main message of the radio, TV, and print ads is that buyers shouldn’t wait to buy a home. In one of their TV ads, below, they point out that 8 out of 10 economists believe that home prices will appreciate over the next 5 years.

NAR’s Buyer Strength TV Ad

There is some kind of small print in the ad that I can’t make out but I suspect it tells us that this statistic comes from the Keller Center at Baylor University, which is mentioned in a similar 60 second radio ad. Hmmm. Keller sounds an awful lot like Keller, Williams, the national real estate brokerage. Oh, yeah, he started the Keller Center with a $5MM donation.

You can find a copy of the entire study here. It has some other interesting statistics not mentioned in the ad. For instance these same economists concluded that the gains would be modest. In fact, here is the breakout of their forecast:

Funny that the ad didn’t mention this. The other interesting fact that is not mentioned is that this survey was conducted in July 2008. Well, I’m sure that the NAR didn’t feel that it was necessary to mention this since nothing has really changed since July of last year.

Actually, there is a set of questions that the economists responded to in this report that I thought was really good and deserves special mention (seriously):

“In addition, 89 percent of the economists agree that people should closely evaluate the benefits and costs of owning versus renting before buying a home.”

You know, these economists must be pretty smart since they tend to agree with me. People shouldn’t buy homes for their investment potential but rather as a place to live. Perhaps if the NAR hadn’t emphasized the investment potential in the past and again today we’d all be in better shape now.

I know that this must be a shocker but the former NAR economist, David Lereah, has recently admitted in a Money Magazine interview that he “put a positive spin” on his housing forecasts. Wow! You mean you can’t believe everything the NAR says?

Now that he’s no longer getting a paycheck from these folks his outlook for housing is not nearly as optimistic as it once was:

My views are quite different now. I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think we’ll see a very modest recovery in sales activity in 2009. But we’ve still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. It’ll take a long time to get back to the peak prices we saw in many markets.

Barry Ritholtz actually has a far more colorful assessment of this turn of events on his Big Picture blog: David Lereah is a jackass.

I’m about to commit real estate sacrilege. Oh, yeah, I do that regularly. Well, this might be perceived as worse than usual since I am going to bash the sacred CRS (Certified Residential Specialist) designation, which is positioned by the real estate industry as a very prestigious designation.

You see, we keep our eyes open for worthwhile real estate training. The only problem is that we rarely find anything that looks interesting and even if we do it ends up being pretty lame 9 times out of 10. Usually it’s fairly superficial or just a rehash of what we learned in our initial licensing course. Nevertheless, I had great expectations for the CRS program because it is so highly regarded but then we received an email promoting the program that really turned me off.

Really, the only problem I had with the program was the program. Here is a verbatim summary of classes and the topics covered in the current program offered by one of the local real estate associations:

Business Planning & Marketing (2 core units)

• Business plan development
• Prospecting techniques
• Budgeting and cost analysis
• Personal promotion techniques

Wealth Building (2 core units)

• Indentifying [sic] money – making opportunities [investing in real estate]
• Comparing potential investment opportunities
• Retirement planning and investing
• Calculating initial investment to rate of return

Marketing with Microsoft (1 elective unit)

• Maximize the effectiveness of e-mail by utilizing
  more features.
• Maintain your customer database in Outlook along
  with their e-mail correspondence
• Establish recurring contacts for birthdays and
  anniversaries
• Create a prospecting system a year in advance
• Provide financial information worksheets for buyers
  and sellers to make better decisions
• Maintain a single calendar and address list on both
  their computer and PDA
• Reduce your marketing costs with the HTML mail
  features of Word and Excel
• Transfer your database to Outlook without retyping
  the names
• Identify more time in your week to work with buyers
  and sellers
• Develop multimedia presentations for buyers and
  sellers, and a pre-listing package

Here are examples of some of the other courses offered at other times:

• Building an Exceptional Customer Service Referral Business (2 core units)
• Technologies to Advance Your Business (2 core units)
• Maximize Your Potential…Personally and Professionally (1 core unit)
• Personal Skills for Professional Excellence (1 elective unit)

Do you see the problem here? Most of this stuff has very little to do with the real estate transaction and everything to do with building a real estate business. Granted, there are other courses offered that have plenty to do with the transaction such as:

• Mastering the Art of Selling New Homes
• Listing Strategies
• Financing and Tax Advantages for Agents and Their Clients

and I’m willing to try these courses when they are offered. However, it’s possible to meet the education requirements for the designation without ever taking a course that has anything to do with real estate transactions. And judging from my experience with other real estate courses I’ve taken it looks like the transaction focused courses might simply be further rehashes of the licensing material. As with most of what the real estate industry does, I think this designation is just another way to justify high commissions.

It’s not easy figuring out what is going on with home prices in Chicago’s individual neighborhoods. The Case-Shiller data, which I believe provides the best insights into home price trends, is not typically available at the neighborhood level and, as I have often pointed out, I think median price data is worthless. Therefore, on an ongoing basis we track months of home inventory and days on the market as proxies for what is going on. The belief is that if inventory and days on the market are rising prices are soon to fall.

Unfortunately, the only way to really tell what is going on is to painstakingly examine individual sales and see if the price trend is up or down. I’ve been meaning to do this for a while but in response to a recent debate on Cribchatter I decided to get off my butt and actually do the analysis. I looked at condo sales in Lincoln Park over the last 30 days, where the previous sale had occurred in the last 6 years. I picked Lincoln Park because there has been some evidence that Lincoln Park has been immune to the home price declines and I looked at condos because there are more of those sold than single family homes. Also single family homes in Lincoln Park are more likely to have been renovated from the previous sale.

Well, here’s what I found:

Lower sale prices are highlighted in red and the data is sorted by the date of the previous sale in order to highlight the pattern. Basically we are seeing price declines in the last 3 years, which is similar to what we are seeing in the Case-Shiller numbers for Chicago as a whole. I guess Lincoln Park is not immune after all.