EXISTING HOME SALES FALL IN DECEMBER, BUT HIGH INVENTORY LEVELS FALL!
NORTH SIDE CHICAGO SEES SUBSTANTIAL UNITS-SOLD DECLINE IN 2007, BUT AVERAGE SINGLE FAMILY, CONDO PRICES INCREASE!
Nationally, home resales fell to a 4.89 million projected annual pace in December - dropping 1.8% from Wall Street projections of 4.98 million units sold. Compared to 2006, total home resales tumbled 13% for Calender Year 2007, to 5.652 million homes and condos closed, according the National Association of Realtors. Across the U.S., the median home price fell 1.4%, to $218,900, last year.
Lawrence Yun, Economist for the NAR, reacted that the market is showing "uncharacteristic weakness." Sales fell despite continuing moderation of mortgage rates. The average 30-Year Fixed Rate Mortgage was 6.10% in December, versus 6.21% in November, according to research by national mortgage underwriter Freddie Mac.
Estimated inventories of homes for sale fell 7.4% across the U.S. at the end of December, representing a theoretical 9-month supply at current sales prices. At the end of November, the estimated supply of resale homes represented 10.1 months of inventory.
Many might see the decline in inventories a very encouraging sign. However, in the Real Time Economics Blog in today's Wall Street Journal, some economists warn that inventories can rise again with the historically-stronger spring housing market, and perhaps grow to record levels if sales continue to stall. Joshua Shapiro, of MFR, Inc. in New York City, feels that the recently-reduced inventory levels have resulted from discouraged sellers pulling their homes off the market in the face of continuing stagnating demand and falling price levels. Shapiro sees a way to go before prices adjust to levels necessary to balance supply and demand in the housing market.
In the North and Northwest Side of Chicago IL Neighborhoods mainly served by Dean's Team 5.046 properties were sold in 2007 - a decrease of 19.2 percent from 2006. The Average Sales Price of single-family homes here increased 2.1% last year, to $477,595. Condos fared better, with an increased average price 4.0% higher than 2006 levels, at $256,078. For two-to-four-unit apartment buildings in the Chicago Neighborhoods we serve extensively, average prices actually decreased 5.3% from year-ago levels, to $507,316.
Theoretical levels of property inventory on the North and Northwest Sides of Chicago jumped to 32.2 months supply within the last quarter of 2007 - over five times the generally-accepted "balanced supply" of six months inventory. On average, slightly fewer than 31.5% of listed properties sold within six months of coming to market as 2007 came to an end.
Both figures have increased dramatically here since the far-more-robust market we enjoyed in Chicago two years ago, when average inventory levels were below five months, listed properties sold quickly, and competition for housing was intense. Indeed, many more homes and condos sold in multiple bids as recently as 18 months ago.
In our Team's experience, in both robust and sluggish markets over the years, homes will sell in any market conditions - but the prices need to be adequately adjusted to meet market demand. Sellers with unrealistic expectations will be disappointed, as buyers wait on the sidelines for prices to drop even further.
Couple this with tighter underwriting standards due to recent spikes in mortgage defaults and foreclosures, we have found that fewer borrowers qualify for mortgage loans than in the last couple of years. Many who do qualify for loans have strong down payments and top credit. These buyers are looking for "bargains" in the distressed property market - bank-owned homes, and those in pre-foreclosure status, in addition to properties for sale on the MLS.
Read relevant posts in today's Wall Street Journal by clicking here.
DEAN MOSS & DEAN'S TEAM CHICAGO
