Case-Shiller: Chicago Home Prices Post Record Drop

I apologize again for the multi-week radio silence here. We’ve revamped our data delivery to be able to better streamline the whole process, and from now on there will be a regular schedule of in-depth data in this space. For now though, it’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI).

For an explanation of how the Case-Shiller data is calculated, check out their methodology pdf. Also remember that the data released on the last Tuesday of a given month is for the period two months prior (i.e. – November data is released in January).

Here are the basic Case-Shiller stats for the Chicago area* as of November:

November 2008
Month to Month: Down 2.8%
Year to Year: Down 12.5%
Change from Peak: Down 16.1% in 26 months

The following chart shows the Chicago HPI scaled such that the September 2006 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the Chicago HPI was at or lower than it was in the latest data (May 2004).

Last month’s drop in Chicago’s Case-Shiller HPI was far more dramatic than what we have seen throughout most of 2008. The 2.8% drop was Chicago’s largest since the peak, as was the 12.5% year-over-year drop. Last year prices had a few months of sharp declines through the winter, and it looks like similar declines are getting started a little earlier in 2008.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare Chicago’s performance to other areas across the country:

And here’s one more chart, in which I have lined up the peak Case-Shiller HPI value for each of Redfin’s markets, so we can see how long each market has been declining, and how much it has dropped from the peak.

Chicago’s price declines continues to come in somewhat slower than most other markets relative to their respective peaks. Unfortunately for home sellers, the price drops only look like they are accelerating in recent months, putting to rest any hope of a market bottom in 2008 or early 2009.

*[Case-Shiller defines Chicago as the entire Chicago-Naperville-Joliet, IL Metropolitan Division, which includes all of the following counties: Cook IL, DeKalb IL, Du Page IL, Grundy IL, Kane IL, Kendal IL, McHenry IL, and Will IL.]

January City/Neighborhood Price Reductions

Let’s take our monthly look at which cities and towns have the most price reductions.

The following charts show the percent of MLS, FSBO or REO listings that were price-reduced at some point before leaving the market (either sold or removed unsold from the market) in the past 90 days. Cities/towns or neighborhoods in which the number of homes taken off the market was too small to provide believable estimates are excluded from ranking.

For those that are interested, I have uploaded the full data set in Excel format here (saved in Excel 97-2003 .xls format by request). In order to keep from overwhelming you with charts, I am leaving out the top ten cities/towns/neighborhoods with the least reduced-price listings from the post, but you can still see that chart in the downloaded file.

First up are the top ten cities with the most price-reduced listings:

Of the 242 cities/towns we ranked in the Chicago Area this month, 110 had price-reduced ratios of fifty percent or more. Orland Hills slipped from the #1 spot last month to #2 this month, with last month’s #3 North Barrington jumping up to #1. A total of five cities from last month’s top ten carried into this month.

Getting a little more granular, let’s look at the top ten Chicago Area neighborhoods for price reductions:

Just 17 of the 102 neighborhoods we ranked in the Chicago Area had a price-reduced ratio of fifty percent or more, which is slightly more than last month’s 10. Only four neighborhoods carried over from last month’s top ten. Garfield Ridge, Roscoe Village, Pilsen / Lower West Side, and West Side have all made the top ten for three months in a row.

For home buyers, cities and neighborhoods that consistently remain near the top of the list for price reductions may be a good place to potentially hunt for bargains. Once a home has been on the market a while, many buyers tend to overlook it, even though a price reduction or two may have brought it into a more desirable price range.

Supply and Demand November Update

Let’s take an updated look at the big picture of supply (residential listings on the market at month-end) and demand (closed home sales). We’re still working on dialing in our statistics gathering methods, so the charts below have changed somewhat from what you saw last month.

Here’s a brief market summary for single-family sales, based on the lates data I have available for Cook County:

November 2008
Active Listings: down 7.1% YOY
Closed Sales: down 32.6% YOY
Median Price: $209,000 – down 19.2% YOY

Our first chart displays the raw supply and demand data back through late 2006:

The inventory trend for 2008 looks overall pretty similar to 2007. No big increases or decreases. While it’s harder to tell with the sales trend line, the number of sales in 2008 has been coming in pretty far below 2007. This trend continued in strength for November.

Here’s a look at the year-over-year (YOY) change in the previous chart. YOY is the best way to interpret the direction of the market, due to the highly cyclical nature of real estate.

Inventory has shrunken slightly YOY, while the number of closed sales has been in the gutter all year long. November’s YOY dip in closed sales was only exceeded by January 2008, when sales fell 35.9% in a year.

The supply and demand pattern in Chicago continues to paint a picture of a weak market. The flat to slightly declining inventory is the only real sign of even a little bit of strength, but with sales continuing to post 20%+ drops YOY, it doesn’t look like the housing market here is set to recover soon. The good news for buyers is that less competition means you are in the driver’s seat.