This quarterly market report is provided by Chip Wagner and Robert Headrick. I have had the pleasure of knowing them for a large part of my appraisal career. They are both very active in appraisal industry matters having held many leadership positions. Their respective firms have been covering the Chicagoland market since 1970 and as a result, they both have a wealth of insight. Their focus is on relocation, litigation and mortgage appraisals as well as slayers of appraisal myths. Chip and Bob author a series of market reports on the Chicagoland real estate market and Chip writes a column on our other blog, Soapbox called Chip Shots.
And their commentary…
In 32 of the 184 communities (about 17%), there was an increase in average sales price from second quarter 2007 to second quarter of 2008. Over 82% of the Chicagoland market has seen a decline in the average sales price.
An interesting observation shows that many of these areas that saw increases were higher priced communities. This is an interesting anomaly in the statistics. In every area, there has been a noted increase in the Months Supply of Inventory (increase in active listings, combined with a decrease in under contract and annual sales volume). What this tells us, in the higher priced communities where fewer homes are selling, and the mean (or average) sales price of these homes appear to be increasing because a few higher sales that are still occurring, influence the mean number as the sample size decreases.
Believe it or not, some significant asking price reductions on multi-million dollar homes are contributing to the appearance of increasing mean sales prices (i.e. a builder is asking $3,500,000 and after 2 years on the market will take $2,200,000). There are many deals out there â€“ at all price points. Unfortunately, many of the deals are as a result of somebodyâ€™s misfortune.
Furthermore, in some communities where tear-down activity may be taking place in that market, the market has slowed significantly for these modestly priced homes, again, influencing the mean sales price in the area by removing the lower priced home sales making it appear that there is increasing average.
I would caution users of this report, that having done doing appraisals in these market areas, that there is evidence of declining values when analyzing Sale/Resale data, and the higher priced housing is especially volatile. This is true with every community. The change in mean sales price may or may not represent truly the communityâ€™s increase or decrease in values. Statistics are a great tool, but they can be interpreted and misinterpreted in different ways.
Again, real estate is local, so some areas are doing better than others as we caution these statistics are macroeconomic data. And indeed, there are some pockets and many instances where prices have increased in the past year, but this is few and far between, not the norm.