Chicago Home Sales Post Small August Gain

By:: Kara Johnson | September 27, 2010

Chicago-area home sales inched up in August, but barely made a dent in the sharp dropoff that followed the end of the homebuyer tax credit program.

Total home sales in the Chicago metropolitan area, included single-family homes and condominiums, rose 1.3 percent in August, totaling 5,633 homes, according to the Illinois Association of Realtors (IAR). That followed a more than 25 percent decline in July triggered by the end of the tax credit.

Year-to-date sales are still nearly 16 percent ahead of the same January-August period last year, due largely to the impact of the tax credits in the first half of the year. However, the sharp dropoff in July meant an annual decline of nearly 20 percent from August 2009 in terms of monthly sales.

“The housing market is waging an epic battle to maintain some hard-earned stability gained in the first half of the year,” said Mike Onorato, IAR president. “On one side we have the combination of record low mortgage interest rates and lower home prices making very compelling affordability conditions for buyers. On the other, we are entering a slower season in fall and winter when activity is typically soft.

Chicago-area home sales are predicted to grow modestly on a month-to-month basis through September and October, then turn downward again in November, according to a forecast from the Regional Applied Economics Laboratory (REAL) at the University of Illinois. The forecast predicts that home prices will fall another 4-8 percent during that period, somewhat less than the 6-9 percent predicted statewide.

REAL calculates that the homebuyer tax credit generated an additional 25,500 home sales statewide, less than one-third the nearly 85,000 attributed to the credit by the federal Government Accountability Office (GAO), or roughly half of all sales during the period.

The lower REAL estimate is due to a belief that the vast majority of those who purchased homes during this period would have done so without the credit, and may have simply made their purchases sooner to take advantage of the credit, and perhaps bought a slightly more expensive home.

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