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Continuing Signs Of Improvement In Chicago Real Estate Market

Thursday, March 4th, 2010 by Gary Lucido

Market conditions for 2 and 3 bedroom condos in the city of Chicago continue to show improvement through February. Once again inventory (months of supply) of these condos is lower on a year over year basis. This continues a trend that began in June, 2009, with February at about half of 2009’s level.

Chicago Condo Inventory

In addition, market times for condos that are on the market also continued their decline.

Chicago Condo Market Times

While inventories of unsold condos did show some decline in Chicago, the main driver of this improvement is an almost doubling of February sales volume from the previous year.

A bit of a caveat is in order here, as I recently discovered some issues with the underlying data. The calculations above differ from the standard industry practice of focusing on closed deals – for sales volume and for market times. In an effort to make the data more current and meaningful we use contracts written for sales volume and we report the market times for condos that are for sale instead of condos that sold. However, there is a problem with this approach in that as many as 15% of contracts written never materialize in a sale. When a contract falls through the property is reactivated and no longer counted as a sold condo in the data above. Consequently, as time progresses, the sales volume for February will decline and the inventory level will rise retroactively. Similarly, deals that fall through are returned to the inventory of unsold condos, having racked up additional market time without a sale. Consequently, the February market times will increase as these older properties are returned to the pool of unsold condos. In other words, both inventory levels and market times are initially understated but correct over the course of a couple of months as the data ages.

As always, you can find inventory levels and market times for some key Chicago neighborhoods and suburbs on our site:

      Chicago Condo Inventory And Market Times Continue To Improve

      Wednesday, January 20th, 2010 by Gary Lucido

      We recently updated our Chicago condo (2 and 3 bedroom units) market data through December 2009. Consistent with all the other positive indicators for the Chicago real estate market, we are once again seeing lower inventory numbers and market times.

      Months of condo inventory in December was less than half of what it was in 2008, at a 14 month supply.

      Chicago Condo Inventory

      This is much better than in the summer when inventory levels were actually higher than the previous year. While units on the market are down slightly, the big impact is from sales that are running at about twice last year’s level.

      Meanwhile, the days on the market are also dramatically better at just under 250 days. That’s still a lot but it’s also the best level since the reporting was modified in October 2007.

      Chicago Condos Days On Market

      As always, you can find neighborhood specific data at the following locations. A few of these neighborhoods really stick out – e.g. the Near South Side.

      New FHA Condo Approval Rules Delayed Yet Again

      Thursday, November 5th, 2009 by Gary Lucido

      First it was going to be October 1, then November 2. That’s when new FHA condo approval rules were going to be implemented. Now it’s December 7. I know it’s shocking but the government just can’t seem to get their act together – in this one rare instance.

      One of the more significant items we’ve been waiting for is some relief on the restriction that condo associations can not be approved if they have the right of first refusal. On the one hand, I’ve never understood why condo associations have this right anyway – like they’re going to have the funds to buy a condo and do what with it? On the other hand, I never understood why FHA cared – as long as it’s not discriminatory. But forever promising to remove this restriction on the right of first refusal one month from now is leaving condo associations in limbo. Why incur the legal expense of changing the bylaws to relinquish the right when the government is going to relax the requirements in just one month? However, with 36% of the buyers using FHA mortgages how can the associations afford to keep waiting?

      As if this issue weren’t thorny enough, some folks within the mortgage industry aren’t exactly optimistic that things will get better even with the new rules. According to Tom Fishwick of Guaranteed Rate, “I am not sure how much easier it will be once whatever changes do go into place. Clearly they are having trouble figuring out how to implement the changes. As it stands now, they will need to review every single condo building that gets an FHA loan. Currently the spot approval allows an FHA underwriters to sign off on the easy projects once they confirm those basic questions. [with the new process] I am expecting long delays, if not a tougher qualification process, even if they will allow for a right of first refusal. For now I am cheering every time they announce another delay.”

      Want to Buy a Condo? Read this First, More Fannie Increases!

      Monday, April 20th, 2009 by Sari Levy

      Are you thinking of buying a condo in a newly constructed building?  Plan to get an FHA loan for the purchase?  If so, you should beware that Fannie Mae has tightened credit for buyers of condominiums. You may recall from earlier posts that Fannie Mae is one of the largest players in the secondary mortgage market, the other is Freddie Mac.  Especially hard hit by the new rules are the condo buildings that are newly constructed.

      Effective as of March 1, Fannie Mae:

      • Will not guarantee mortgages in condo buildings where fewer than 70% of the units have sold (up from the previous number of 50%
      • Will not back loans for sales in buildings where there are 15% of current owners delinquent on Homeowner Assessment fees
      • Will not back loans where more than 10% of units in the building are owned by a single entity (generally the developer)

      Starting in April, buyers without at least a 25% down payment will have to an additional   fee at closing equal to 0.75% of their loan regardless of their credit score. As of this writing, Freddie has not followed along with the increases….yet!

      Chicago Condo Inventory Worse Than It Looks

      Thursday, April 16th, 2009 by Gary Lucido

      Just completed our bi-monthly (Strange word. Could mean twice a month or every two months. We use the latter definition.) assessment of the 2 – 3 bedroom condo market in Chicago and some of our key neighborhoods and the data masks what’s really going on. As the graph below shows the fall and winter were brutal with inventory levels reaching about a 2 year supply. Although inventory has now dropped to a bit less than 1 year’s supply (still a lot) this masks the fact that the sales level is half of what it was a year ago. The reason that inventory levels aren’t higher is that there are fewer condos on the market right now than last year and, more significantly, tons of condo listings are expiring or being canceled. Sellers are still holding out for better days.

      Chicago Months Supply of Condos

      The other notable trend is the number of days that it takes these condos to sell. 4 out of the last 7 months have seen this number above 100 days. People who have to sell stick it out and take the price cuts to move on with their lives.

      Chicago Condos Days On Market

      You can always find our latest statistics on the Chicago market here and we also keep inventory and days on the market data at the neighborhood level:

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