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Chicago-area home prices edge up, first year-over-year bump since ’08

Home prices showed their first year-over-year increase since March 2008.

Source: Illinois Realtors Association

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Updated: July 23, 2012 7:43AM

It was tiny, but significant — Chicago area home prices rose for the first time in more than four years in May, while sales rose double digits throughout the state, the Illinois Association of Realtors said Thursday.

The median price edged up 0.1 percent, or $100, from a year earlier to $170,000. While the rise might seem trivial, “the fact that it is not negative, I think is very interesting news,” said Geoffrey Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois.

Indeed, in May 2011, the median price sank 10.8 percent from May 2010, and the last time prices showed a year-over-year increase in the nine-county area was March 2008.

Still, the May price rise does not mean it’s anywhere near time to pop champagne corks.

“Overall, I think the long-run trajectory is going to start to turn upwards, but it’s going to be bumpy,” with prices fluctuating month-to-month depending on the mix of houses sold, Hewings said.

The backlog in foreclosures, created by now resolved documentation issues, still need to work their way through the market, he noted. A report out earlier this month from RealtyTrac showed foreclosure filings in the area spiked 56.2 percent in May from a year earlier and rose 27.3 percent from April.

“Until those things work there way through the system, we’re going to find that they’re going to have a very depressing impact on the prices,” Hewings said.

Helping nudge the price up last month was the fact that 23 percent of homes sold were worth more than $300,000, up from around 17 percent the past couple of years, when most homes sold were under $200,000, Hewings noted.

He expects median prices will rise 1 percent to 2 percent year-over-year in June, July and August. During that time last year, prices declined between 5 percent and 13 percent.

“If our forecasts hold, that would be a rather striking turnaround,” he said.

The association report showed sales statewide recorded their best May since 2007 last month as sales in the Chicago area rose 25.3 percent to 8,276.

At Century 21 Alonzo and Associates in La Grange Park, broker-owner Loretta Alonzo said business is up more than 90 percent through the first five months of this year compared to a year earlier in terms of signed contracts, and May was a very busy month with an estimated 150 percent rise in business over the prior year.

“Our May was the best May we’ve had in over four years,” said Alonzo, who also is president of the association.

She attributes the increase in sales to continuing low home prices and interest rates. Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan dropped to 3.66 percent this week, a new record, and down from 3.71 percent last week.

Sellers have gotten more realistic with pricing, she and other realtors said.

“Activity is up, prices are flat,” said Ed Hall, owner of the Hall Group of Coldwell Banker in Hinsdale.

Last month, he and his two associates handled 24 transactions — a pace he had not had seen since 2006. Among other signs of improvements he has seen are some homes where multiple buyers put in bids.

“That’s very good news,” he said.

The association report showed in the city of Chicago, median home prices rose 6.8 percent from a year earlier to $203,000, the third straight month of increases. Home sales rose 19.6 percent, to 2,037.

Statewide, the median price rose 3.6 percent, to $145,000, also the third consecutive month of increases. Home sales rose 22.1 percent, to 11,984. That was the best performance since 14,493 homes were sold in May 2007.

For homeowners who have been holding off on selling, now could be the time to get off the fence, even though no dramatic jump in median prices is expected soon, according to Hewings.

“For a seller, if they’re sort of waiting around and hoping that in several months that prices are going to recover, I don’t think they’re going to recover dramatically enough,” he said.

But while they are likely to get less for their house than they had once hoped, “they’re also going to spend less for a property that they have in mind,” he said, and combined with the low interest rates, that could make it a more attractive time to sell than it was a year ago.

Contributing: Emily Morris

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