Monday, July 12, 2010

Recovery,recovery, where for art though?

Every Monday we are talking about the economy or housing market with a particular eye on Chicago. There is a great deal of talk on the recovery. A few weeks ago I quoted the Chief Economist from Freddie Mac when he asserted there will be a slow recovery with no double dip. Right now there are all kinds of mix signs. John Tuccillo, President, JTA, LLC (John is an economist, consultant and one of the foremost real estate and housing finance economists in the United States.) said that mixed signs – some still down (jobs) but others showing a turn around (the Dow (every other day )) are an indication of having hit the bottom and starting the hard work of recovery.

Each day I am asked “how is the market in Chicago…which neighborhood will recover first." Of course, no one has a crystal ball and no one can be certain. But today and for the next few Mondays I would like to pose a few thoughts on neighborhood recovery and I WELCOME debate and discussion. And if you have any specific questions you would like to address – post them and I will try to get some answers.

One theory of recovery is it starts with the wealthiest markets (Near North/Gold Coast). The logic behind this is that prices would have dropped enough to draw buyers from surrounding markets.

So the data to support this would be Near North would have dropped in average price, driving growing sales, the beginning of lower inventory and a recovering price and the surrounding area (Lincoln Park) would not be seeing price recovery.

Looking back 2 years and 4 points in time (Dec 08, June 09, Dec 09, June 10) here are the facts:

• The Near North has done a rollercoaster with strong average price in Dec 08 but a build up of inventory to 2 years. Average price dropped then from $648K to $450 (oops) but has rebounded in the last year AND managed to see inventory drop (average sold price is now $529 with a year of inventory. Hard to tell what drove it but to cut inventory in half – even if you allow for expired/cancelled listings – would take a inflow of buyers from other parts of the city

• Lincoln Park on the other hand saw the same drop in average price but hasn’t rebounded at all in price (price down 40% Dec 08 to June 09 but only up 2% since then. Inventory hit low levels (7.6 months in June 09 but has settled back to one year this June.

What do you think? What is your recovery theory? What neighborhood would you like to buy or sell in and would you like some solid information on the market?

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