Double-Digit Property Tax Hikes Put Squeeze On Home Resale Values
While resale-home prices in Chicago continued to inch higher in October, buyers and sellers are worrying about the elephant in the room—rising real estate taxes.
“Property tax assessment values overall are nearing, and in some cases surpassing market values,” warned Realtor W. Walker Robison, Jr., partner with Mark Nardone in Lake View-based MW Group, RE/MAX Edge. “As tax escrows adjust, property owners may be caught off guard with the often double-digit increases in the total amount owed.”
In 2018, former Cook County Assessor Joseph Berrios raised the estimated fair market value of some properties from 30% to more than 140% in North Side and Northwest Side neighborhoods. This came as a parting shot from Berrios after he lost his re-election campaign to challenger Fritz Kaegi, the newly elected assessor.
“Hundreds of owners who escrow taxes every month have received a letter from their lender asking them to escrow potentially hundreds—sometimes thousands—of dollars more a month than anticipated to cover rising property taxes,” Robison said.
For example, one Old Town 3-flat owner saw his monthly tax escrow skyrocket 248% to $6,386 from $1,832 for four months this summer to replenish the building’s depleted tax escrow account.
“Anyone who is monthly payment sensitive will need to seriously consider relocating if they can't appeal,” said Robison.
Another trend impacting the city housing market is the sale and deconversion of condominium buildings into rental apartments. “One thing is certain—the more buildings that deconvert to rentals, the more owner-occupied units decrease in a market that already has struggles with available inventory,” Robison said.
Chicago home values rise 1.4%
The median price of a home in the city of Chicago in October rose 1.4% to $275,356, compared with $271,500 in October of 2018. Year-over-year home sales decrease 2.8% in Chicago with 2,048 units sold in October, compared with 2,108 units a year ago, reported Illinois Realtors.
“Despite some local political uncertainty, Chicago’s housing market remains active,” noted Maurice Hampton, president of the Chicago Association of Realtors.
“We’re welcoming in a new generation of home buyers incentivized by low mortgage rates and sales prices that have grown but remain reasonable.”
Single-family home and condo sales in the nine-county Chicago Metro Area in October totaled 8,889 units, down 3.3% from October 2018 when 9,188 units were sold. However, the median price in October rose 4.3% to $240,000 from $230,000 in October of 2018. The median is a typical market price where half the homes sold for more and half sold for less.
“Consumers sent a clear message they were willing to pay more to get into a home as we enter the final quarter of the year,” said Ed Neaves, president of Illinois Realtors.
“The result is continued, sustained pressure on those who want to buy a home, but who must select from a diminished number of listed properties,” Neaves said. “Buyers face a choice of moving quickly and paying more, or sitting tight and waiting for additional properties to come on the market.”
Statewide home sales
The statewide median price in October was $200,000, up 5.3% from $190,000 in October of 2018. A total of 12,914 single-family homes and condos sold in October, down 2.9% from 13,305 units in October of 2018.
The time it took to sell a home in October averaged 53 days, an increase of 1.9% from the year before. Available inventory totaled 58,561 units for sale, a 5.5% decline from 61,992 units in October of 2018.
“Continuing a pattern of the last several months, median prices have increased while sales declined year-over-year in October,” said Geoffrey J.D. Hewings, a University of Illinois economist. “Affordable inventory remains a problem even with low interest rates tempting potential buyers back into the market.”
On November 21st, benchmark 30-year fixed mortgage rates slipped to an average of 3.66% from 3.75% a week earlier, reported Freddie Mac’s Primary Mortgage Market Survey. A year ago, 30-year fixed loans averaged 4.81%.
Sales and price information for the Illinois Realtor survey was generated by Multiple Listing Service closed sales reported by 26 participating local realty 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.