Q2 market stats

Q2 market update

Here is the second quarter by the numbers. The first chart breaks down condo sales by various downtown neighborhoods. We compare Q2 sales activity to Q2 of 2022 for both charts.

	Sold Units	Median SP	Average SP	Market Time	New Listings	List Price
Lincoln Square	-36%	26%	14%	-47%	-35%	14%
North Center	-42%	11%	10%	71%	-33%	11%
Lakeview	-42%	1%	0%	13%	-37%	0%
Lincoln Park	-35%	3%	5%	0%	-30%	5%
Near North Side	-24%	-7%	-10%	3%	-19%	-9%
Irving Park	-30%	8%	3%	-42%	-42%	3%
Avondale	-23%	22%	14%	71%	-34%	14%
Logan	-34%	0%	2%	-18%	-36%	2%
Humboldt Park	-42%	8%	6%	-31%	61%	11%
West Town	-37%	5%	3%	24%	-41%	4%
West Loop	-32%	-1%	-4%	20%	-35%	-5%
Lower West Side	-29%	8%	1%	53%	-25%	1%
Loop	-33%	-7%	-18%	57%	-23%	-18%
South Loop	-32%	2%	0%	-12%	-30%	0%
AVG	-34%	6%	2%	12%	-26%	2%

The chart below tracks sales activity for single family homes over Q2.

	Sold Units	Median SP	Average SP	Market Time	New Listings	List Price
Lincoln Square	-35%	11%	8%	-47%	-35%	14%
North Center	-41%	13%	7%	71%	-33%	11%
Lakeview	-37%	5%	5%	13%	-37%	0%
Lincoln Park	-38%	0%	3%	0%	-30%	5%
Near North Side	-50%	21%	74%	3%	-19%	-9%
Irving Park	-50%	-4%	-9%	-42%	-42%	3%
Avondale	-31%	-37%	-19%	71%	-34%	14%
Logan	-41%	10%	13%	-18%	-36%	2%
Humboldt Park	-2%	-7%	4%	-31%	61%	11%
West Town	-46%	-4%	-3%	24%	-41%	4%
West Loop	-27%	-13%	-26%	20%	-35%	-5%
Lower West Side	-38%	-18%	-20%	53%	-25%	1%
Loop
South Loop	0%	68%	68%	-12%	-30%	0%
AVG	-34%	3%	8%	8%	-26%	4%

The big takeaway is that volume is down significantly across the board. However, pricing is holding up. The only markets we are seeing both lower median prices and lower average prices are Near North Side, The Loop, and The West Loop. What personally surprises me is that the South Loop is relatively flat. This is interesting because the South Loop has historically been weaker compared to the West Loop and Near North Side. This may have to do with the fact that the South Loop is generally more affordable and similar in proximity to Downtown which may be attracting more people than in the past.

Overall, pricing is holding up much better than anticipated, and we could very well see average and median prices in Chicago up slightly by the end of the year. The reason for this is supply. You’ve probably heard time and time again that owners are “locked in” because they have 3%-5% rates that are too valuable to give up. This is happening to some degree, but it should also be noted that post GFC, we have seen YOY declines in inventory.

This is why I don’t think the “lock in effect” theory makes much sense. We saw historically low interest rates for over a decade, and we saw declining inventory on a YOY basis during that same period. I think people are getting it wrong when they say that if rates go down, then inventory will explode, which will lead to lower pricing. The data post GFC does not support that theory. It’s important to remember that sellers are buyers. This could actually create even less supply in the long run because owners would be able to lock in cheaper longer term debt, which gives them more flexibility in terms of being able to hold a property longer.

In other recent news, Fitch downgraded U.S. treasuries from AAA to AA+. What does this mean for mortgage rates? Since the rating downgrade, we now have the highest mortgage rates since 2002. When bonds are downgraded, investors will demand a higher yield for carrying debt. When the news was announced, the bond markets immediately sold off and yields shot higher. And when the 10 year yield rises, that means 30 year mortgage rates rise with it. Here is a snippet regarding Fitch’s decision to downgrade U.S Treasuries.

“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the rating agency stated. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”

Hopefully this serves as a wake up call for the politicians.