April Home Sales Up 28% YOY (Chicago, McHenry: student loan, job market, neighborhoods)

[Lookout Kid]

Originally Posted by trailblazer33

This indicates housing has not hit a bottom, because it is not in alignment with historical norms/affordability.

Or it indicates that the world has changed since the 1980s. Past performance is not a guarantee of future results.

[Vlajos]

http://www.chicagorealestatedaily.co...plummet-in-may

Home foreclosure filings in the Chicago area fell last month as the flood of underwater properties recedes, a new report shows.

A total of 7,582 homes here had a foreclosure-related filing in May, plummeting 22.2 percent from April and 49.7 percent from a year earlier, according to Irvine, Calif.-based RealtyTrac Inc., an online marketplace for foreclosed properties.

With one filing for every 500 homes, the city and surrounding suburbs dropped to the 26th-highest metro foreclosure rate in the U.S. The region, which includes 12 counties from northwestern Indiana to southern Wisconsin, had the 10th-highest rate in April.

[Lookout Kid]

The increase in rent prices is really helping out the people who bought city condos as couples, but are now underwater with them as families with kids. I now have at least a dozen friends who were stuck in the condos because they were under water, but who have now rented them out and went on to buy second homes. So they are new buyers in this market who weren't looking last year, generated by the increases in rents across the city.

And prices have clearly rebounded in my old building in Buena Park (a 20+ unit building). Our unit sold in March for $40,000 higher than the last comparable unit in 2011. Our friends sold theirs for $60,000 higher last month. I now this is anecdotal "micro level" information, but most of the people I know who were held back by real estate over the past few years have been able to move on this year.

[divakat]

I don't see the current "boom" as sustaining itself for long. Primarily because investors (who have been driving the market and are responsible for the great housing market) are starting to exit. Second, inventory is at record lows all over the country, including the Chicago area, which is why housing prices are higher.

Housing Recovery Is a Sham Says the Guardian



Third, the gov't has already indicated that they will taper their quantitative easing most likely starting in September. I expect interest rates to be at around 5% by early next year, and could go up to 6% shortly thereafter. That will put a damper on demand. In addition, baby boomers are retiring in such vast numbers and there are not as many younger home seekers to take their place. We have an entire generation now laden with non-dischargeable student debt and record levels, and high unemployment so they cannot pay it off. These people are not getting married, not having kids, and not likely to buy a home. The employment gains as far as I know have been mostly in service level jobs, like in restaurants, and in retail---not white collar, high paying jobs.

The "recovery" has been so drastic (less than places like CA and NV but still drastic imo), that I worry there could be a large correction downward. I hope that is not the case, and I hope that the increase in prices is more gradual now that the fed is pulling out. Some neighborhoods around the Chicago area and burbs are up over 10% year over year. Couple that with higher interest rates and stagnant incomes, and I don't think it is good for the economy.

Chicago Home Prices and Home Values in IL - Zillow Local Info

Du Page Home Prices and Home Values - Zillow Local Info

[Vlajos]

Chicago Real Estate Market Update: May Home Sales On A Rocket#

"No doubt this story about how the Chicago real estate market is on a rocket is starting to get a bit boring - same old news. May home sales in the city once again leaped way ahead of last year - 34.8% on top of last years 19.6% increase over the year before that. And that's the 23rd month in a row of year over year sales increases.
When the Illinois Association of Realtors announces the numbers two weeks from now they will report something more like 29.2% because of the the way they make their comparisons. Rest assured that my numbers better reflect what is going on. Also, they will report how median prices hit the highest level in 4 years. I don't pay too much attention to median prices because they don't really reflect price changes as much as they reflect mix changes."

"The percentage of home sales that are distressed is on a clear downward trend over the last 2 years and in May it hit the lowest level in the last 5 years at 27.5%. This is why median prices are increasing now."

[Lookout Kid]

Originally Posted by divakat

We have an entire generation now laden with non-dischargeable student debt and record levels, and high unemployment so they cannot pay it off. These people are not getting married, not having kids, and not likely to buy a home.

I saw some analysis of this supposed "student debt crisis", and the average Gen Y borrower owes less than $20,000 (and that doesn't include the people who have no debt at all). That is hardly crippling. There are horror stories in print about people with $300,000 of Ivy League law school debt that they can never hope to pay off, but that is far from typical. This generation will still buy homes in large numbers. It may just be a bit later in life than their parents.

[divakat]

It's actually $27,000 and the issue is that there is high unemployment among recent grads, thus making it hard to pay their student loans, for which the interest rates are set to increase. Not only that, but COL is much higher now (rent, gas, food) so that this generation is set to be the first to be in worse shape than their parents.

More Evidence On The Student Debt Crisis: Average Grad's Loan Jumps To $27,000 - Forbes

[Lookout Kid]

Originally Posted by divakat

Not only that, but COL is much higher now (rent, gas, food) so that this generation is set to be the first to be in worse shape than their parents.

I don't know about that... Gen X may be worse off than their parents too!

[Attrill]

Originally Posted by divakat

Third, the gov't has already indicated that they will taper their quantitative easing most likely starting in September. I expect interest rates to be at around 5% by early next year, and could go up to 6% shortly thereafter. That will put a damper on demand.

Actually, rising interest rates is going be a driver of demand - i.e. "get a house before the rates go up!". 6% really isn't that bad either, rates were never below 5% during the boom, and it kept going. As recently as 2000 1 year ARMs were as high as 7%, so the market can absorb some increases.

[Vlajos]

Originally Posted by Attrill

Actually, rising interest rates is going be a driver of demand - i.e. "get a house before the rates go up!". 6% really isn't that bad either, rates were never below 5% during the boom, and it kept going. As recently as 2000 1 year ARMs were as high as 7%, so the market can absorb some increases.

In 2000, when I bought my first place, my rate was 8%.