Around this time a year ago, Kevin Anderson, a broker at Chicago’s largest residential real estate company @properties, was feeling downcast. A historic snowstorm had just hit the Windy City and he had only managed to list or sell two properties. As 2012 enters its second month, Anderson is more upbeat. So far he has four units listed or under contract.
“It is a buyer’s market,” Anderson said. “We have not seen this in decades, so it’s a great time to buy if you can.” Consumer sentiment is also up, he said.
For Anderson and other Chicago real estate agents, there is some reason for optimism. According to a Feb. 9 report by the Illinois Association of Realtors, home sales was up 14.8 percent statewide during the final quarter of 2011. Within the city, 4,225 single-family homes and condominiums were sold during the same period, up 11.1 percent from the 3,804 units sold in the four quarter of 2010.
Anderson said he observed an upswing in the last six months, adding that he expects a modest growth this year.
Part of that increase in sales may be attributed to the drop of home prices, the lowest in the Chicago area since May 2001, according to a Standards and Poor/Case Schiller study. The most recent data available showed that as of Nov. 2011, prices across the board in Chicago were down 5.9 percent from Nov. 2010.
Aside from Chicago, other cities with the biggest year-over-year price decline are Atlanta, Seattle, Tampa and Las Vegas.
In terms of actual median price in Chicago, that translates to $159,999, down 8.6 percent from $175,000 in the fourth quarter of 2010.
“Prices have come down and the interest rate is at a historic low,” Anderson said. “That means the home affordability is much better for the average person.”
According to the Federal Home Loan Mortgage Corporation, interest rate for 30-year, fixed-rate mortgages averaged 4 percent in the North Central Region of the U.S. during the fourth quarter of 2011, giving more incentive for new buyers to re-enter the market.
As for the sharp drop in home prices, Anderson explained that he sees it as a “price correction” rather than a sign of a depressed market. He also pointed out that the remaining foreclosure sales are dragging down home prices, thus making the market “favorable” to qualified buyers.
“One of the problems with all the foreclosures is that people are getting home loans that they should never have gotten before,” said Anderson referring to the sub-prime mortgage lending. “There were many people who still bought properties even though they could not afford to continue payments.”
Despite some head winds including foreclosure and abnormally high unemployment in the Metro Chicago area, which is up 9.3 percent as of Dec. 2011, Anderson said he expects the real estate market to pick up steam in April, May and June. He also pointed out that home inventory in Chicago has also gone down from 15 months to nine months.
“It is obviously not what it used to be and it is still a long way to go to full recovery, but it is getting better,” he said.
Meanwhile, economist told Bloomberg News that construction of single-family homes will grow five percent this year, allowing the housing industry to contribute to economic growth for the first time in seven years.
(Also published in Xinhua English)