Chicago Home Sellers And Buyers Trumped By Government Shut Down
The financial chaos created by President Donald Trump’s 35-day government shut down is having a negative ripple effect in Chicago’s housing market, economists say.
Although Trump agreed to a deal with Congressional leaders on January 25th to reopen the government for three weeks through February 15th while talks on border security continue, the nation’s home buyers and sellers remain wary, and the chaos continues.
Now, Trump is threating to shut down the government again on February 15th, or use his presidential powers to secure funding for construction of the proposed security wall along the U.S. and Mexico border. The shutdown, which began on December 22, 2018. is the longest in U.S. history.
“Clearly, the uncertainty in the market exacerbated by the partial government shutdown has generated some additional caution among potential home buyers,” said Geoffrey J.D. Hewings, a University of Illinois economist. “The outlook for the next three months suggests a continuation of this trend, dampening price increases in Illinois and Chicago.”
According to Illinois Realtors’ latest survey, single-family home and condominium sales in Chicago in December of 2018 totaled 1,698 units, down a hefty 17.5% from 2,058 units in December of 2017. Year-end 2018 home sales totaled 27,438 units, down 4.4% from 28,691 units sold in the city in 2017.
The median price of a home or condo in Chicago in December of 2018 slumped 7.1% to $246,500 from $265,250 in December of 2017. The year-end 2018 median price reached $290,000, up 1.8% from $285,000 in 2017.
In the nine-county Chicago metropolitan area, sales of single-family and condos in December of 2018 totaled 6,865 units, plummeting 16.5% from December of 2017 when 8,217 units changed hands. Year-end 2018 home sales totaled 113,965 units, down 3.7% from 118,339 units in the nine-county region in 2017.
The median price in December of 2018 was $225,000 in the Chicago metro area, the same as December of 2017. The year-end 2018 median price reached $242,500, a gain of 3.2% from $235,000 in 2017.
Here is how the Collateral Risk Network, a national think tank, explained the impact of the government shutdown on economic uncertainty and the ability to purchase or refinance real estate:
• Fannie Mae and Freddie Mac. These mortgage generators are continuing normal operations, but a slowdown in Internal Revenue Service (IRS) tax verifications are delaying lenders’ ability to originate loans and is reducing the volume of mortgages delivered to the government-sponsored enterprises.
• Federal Housing Administration. While the FHA is continuing to endorse single-family loans with the exception of reverse mortgages and Title 1 loans, staffing limitations could extend processing times. Also, the FHA is not making new loan commitments in its Multi-family program during the shutdown.
• U.S. Department of Housing and Urban Affairs. HUD said because of the shutdown funding has expired on 1,150 government-supported low-income rental projects across the nation.
• Department of Veterans Affairs. The VA has determined that housing is an “essential service” for military veterans and will not be affected by the shutdown. Apparently, Trump’s support for the military is continuing.
• U.S. Department of Agriculture Rural Housing Service.
This low-interest loan program for farmers and rural America has been impacted by the shutdown and single-family loan processing has come to a halt. So much for President Trump’s support of farmers and his band of rural voters.
“The current atmosphere presents some opportunities for both buyers and sellers, despite the historically slow time of year for the market,” observed Tommy Choi, president of the Chicago Association of Realtors and broker at Keller Williams Chicago–Lincoln Park.
“With the start of the government shutdown, consumers were more measured in their approach to buying a home. However, when they found the right home, at the right price, they were willing to act quickly,” Choi said.
“The housing market’s momentum softened the further into 2018 we got, but overall there are positive indicators going into the new year, particularly for sellers,” said Ed Neaves, president-elect of the Illinois Realtors. “Buyers face an environment where the number of available homes on the market will continue to be low in many areas, which will put steady upward pressure on median prices.”
The time it took to sell a home statewide in December averaged 59 days, down from 60 days a year ago. Available housing inventory totaled 47,048 homes for sale, a 2.4 percent decline from December of 2017 when there were 48,196 homes on the market.
• Statewide home sales. A total of 9,968 single-family homes and condos were sold in Illinois in December of 2018, down a hefty 14.7% from 11,691 units in December of 2017. Year-end 2018 statewide home sales totaled 160,794 units, down 2.5% from 164,842 in 2017.
The median home price in Illinois in December was $185,500, up 0.3 of 1% from December of 2017 when the median was $185,000. The median is a typical market price where half the homes sold for more and half sold for less. The year-end 2018 median price in Illinois reached $202,000, up 3.6% from $195,000 in 2017.
The sales and price information were generated by Multiple Listing Service closed sales reported by 27 participating local boards and associations including Midwest Real Estate Data, LLC.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.