March home prices in the Chicago area and nationally sank to lows not seen since the housing bubble burst, and the widely watched S&P/Case-Shiller home-price index officially labeled it a double dip in home values.
Despite job growth and very attractive mortgage interest rates, some realty agents feared the news would weaken the smattering of homebuyer confidence they are witnessing.
A case in point: Coldwell Banker Residential agent Shawn Daly on Tuesday received an email from a client working in Iraq who had put in a $450,000 offer on a lakefront Chicago condo. The client, who had read the news online about home-price declines, wanted to drop his offer to $400,000, despite the fact that the seller’s last counteroffer was $525,000.
The S&P/Case-Shiller index showed that, in the Chicago area, prices in March had fallen 34 percent since the market peaked in November 2006 and were at levels not seen since April 2001. In March, according to the index, local home prices fell for the eighth consecutive month, slipping 2.4 percent from February. On an annualized basis, prices were down 7.6 percent.
Nationally, home prices plummeted to mid-2002 levels, and home values for the 20-city composite index fell below their previous low, reported in April 2009.
Maureen Maitland, an S&P vice president, attributed the continued bad news to the varying states of recovery in regional economies, a general lack of confidence in the housing market and an oversupply of homes, including foreclosures that are dragging down the broader market’s prices.
“If you can hang onto a house right now and you don’t have to sell, you don’t,” Maitland said. “All indications are that prices are going to continue to fall.”
But real estate is local, and in some areas, price declines have meant increased sales activity as first-time buyers who can qualify for a mortgage enter the market with plans to stay in a home for several years and move-up buyers seem willing to trade lower gains on their own sale for low-interest rates and attractive purchase prices.
“There are buyers out there and they are the people who’ve been saving their money and they’ve been waiting for an opportunity to take that step up,” said Pat Callan, broker/owner of Realty Executives Premiere in Wheaton. “They’re not buying today to sell tomorrow.”
Much of the price decline is the result of difficult comparisons with a year ago, when the housing market was fueled by sales of properties that qualified for federal homebuyer tax credits. Purchases of nondistressed properties boosted overall home prices temporarily. Now, distressed sales are accounting for a larger share of the market, dragging down prices.
Last week, RealtyTrac said that sales of foreclosed properties in Illinois made up 29 percent of home sales in the first quarter and that the average price of a foreclosed home was $132,983, a discount of almost 41 percent from prices of nonforeclosed homes.
Also last week, the average rate on a 30-year, fixed-rate mortgage eased for the sixth straight week, to 4.6 percent, according to Freddie Mac. A year ago, the rate was 4.84 percent.
“Even last year, we were expecting prices to go into a double dip,” said Celia Chen, senior director of Moody’s Analytics. “The general picture is one of a very slow bottoming. On the price side, it will probably be another quarter or two before we hit bottom.”
In Crystal Lake, Baird & Warner agent Shirley Wojcicki said she believes prices will continue to fall, but she’s not getting asked as much as she used to about when the market will hit bottom.
“I think it’s because the prices aren’t going down as fast as they did a year ago,” she said. “I’m working with a lot of optimism right now.”
Despite the long holiday weekend, Wojcicki notched two home listings and on Saturday showed homes to potential buyers.
Other cities that posted new lows on the housing price index in March are Atlanta; Charlotte, N.C.; Cleveland; Detroit; Las Vegas; Miami; Minneapolis; New York; Phoenix; Portland, Ore.; and Tampa, Fla.
Washington was the only city to report a small uptick in March prices both from February and a year earlier.
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