Zillow: Chicago Home Prices Down 8.9% From Last Year

December 18, 2008

Residential

The inaccuracies of Zillow.com’s Zestimates are not looked upon all that favorably by many real estate agents, brokers, and appraisers. I recently attended the SPARKt conference for technology in real estate where Brian Stalizer of Zillow spoke. After he gave his overview of Zillow and explained how they make money, he opened the floor to questions. The crowd was largely real estate agents and brokers, and they were not overly kind to Brian, pushing him to explain how his company can give accurate estimates of home values in such a volatile market, especially when Cook County is notoriously slow with official documents. Brian’s defense of Zillow was basically, “We try very hard. We have a lot of smart people. We are not perfect, but we disclose how far off we are as soon as we know.”

Nation Wide Data

Map of Chicago's Real Estate Market Year-On-Year Home Price Appreciation

Map of Year-on-Year Home Price Appreciation in Chicago

That said, Zillow released some very interesting data today that indicates home values nation wide have dropped 9.7% compared to last year. And they are down 12.8 percent compared to the market peak in 2006. Also, nation-wide Zillow estimates that 14.3% of homes nation wide are upside down, meaning the homeowner owes more on the mortgage than the home is worth.

Chicago Faring Better Than Nation-As-A-Whole

Zillow provides information sliced and diced in many different ways: numbers on all of Chicagoland, by Cook county, by zip code, and all the way down to their list of 74 neighborhoods. When I average the year-on-year home value change column for the 69 Chicago neighborhoods they have data for, I get -7.8% instead of the -8.9% they list for Chicago in the city data section. I should probably trust their number crunchers’ number of 8.9%, but I found the discrepancy interesting. With the nation-wide market having dropped 9.7% last year, Chicago’s diverse economy seems to have helped it stay slightly ahead of the nation as a whole.

According to Zillow’s numbers, the average home value in Chicago is $234,643. Some of the least affluent neighborhoods in the cityâ??those with the lowest home valuesâ??fared the best: South Chicago (+3.7%), Armour Square (+3.5%), North Lawndale (+2.9%), Washington Heights (+2.1%), Grand Crossing (+1.9%), and West Pullman (+0.4%) all actually had home value increases over the last year. Armour Square is actually an exception?it’s average home value is actually above average for Chicago at $287,534. These positive numbers could be an indication of several things. Since most of these areas are often where immigrants first settle into the city, it could be an indication that immigration is still going strong in Chicago. These home-value increases could also be an indication that people are looking for the best buy possible.

Surprising to me were the neighborhoods that fared the worst in the survey were also some of those with the least valuable homes: Lower West Side (-18.5%), Douglas (-18.0%), West Lawn (-17.6%), Dunning (-16.2%), and Belmont Cragin (-16.2%) saw the largest declines in value according to Zillow.

How About the Most “Desirable” Neighborhoods?

Some of the most desirable neighborhoods in Chicago are doing well compared to the nation and Chicagoland as a whole: Hyde Park?home of President Elect Obama (-1.4%), North Center (-1.4%), Lincoln Square (-2.2%), Lake View (-2.5%), Lincoln Park (-3.9%), and the Near South Side (-4.5%) have all seen drops, but they are moderate when compared to the metro area and the nation. Many of the areas around the center of the city are not doing quite as well: The Loop (-7.7%), Near West Side (-5.8%), and the Near North Side (-10.4%) have all seen bigger drops.

Home Equity

Chicago Real Estate Market Percentage of Homes with Negative Equity

Chicago Real Estate Market Percentage of Homes with Negative Equity

Zillow did not provide home equity information on the neighborhood level; they only provided this information on their summary page, so there it’s only possible to comment on Chicagoland as a whole. Zillow says that Chicagoland home owners average $39,735 of equity in their homes, which they say is an average of 19.9% of the value of the homes. This number has gone up dramatically compared to 2006 and 2007 when home owners had an average of 8.6% and 6.0% of equity in their homes.

They also say that 12.9% of Chicagoland homes have negative equity, compared to 32.8% in 2007 and 38.6% in 2006. What are the possible explanations of these numbers? The extremely high negative equity numbers in 2006 and 2007 have to do with how many homes were purchased with no money down as well as how much home equity home owners had cashed out of their homes?two options that have been dramatically curtailed in 2008.

Distress Signals

Zillow wraps up their data with what they call Distress Signals…and there are two big numbers here. According to Zillow, 80.6% of all Chicagoland homes have lost value in the past 12 month. Even more surprising is that 20.4% of all homes have lost value over the past 5 years. This means that one fifth of all homes bought 5 years ago are worth less now than when they were purchased.

The second Distress Signal category is what percent of homes are being sold for a loss?the sellers have to bring a check to the closing. 4.6% of homes sold in the past 5 years have been sold at a loss. This number quadruples to 18.6% in the past 12 months. This makes it clear that nearly all the homes sold at a loss have occurred in the last 12 months.

Sweet Home Chicago?

How your home value is doing depends hugely in which part of Chicago you live in. But, on the whole your home is doing better than in many parts of the country. When you look at Zillow’s map, you see California and Florida’s values plummeting. So, maybe with a sense of schadenfreude, you can take a some cold comfort in the fact that others have it much worse than you.

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About Rod Holmes

Rod has been a broker working in Chicago since 2004. He has worked with developers, buyers, sellers, and as well as managing offices. He is currently a partner in Chicago Style SEO working primarily with real estate firms to improve their Internet marketing. Rod lived for nearly ten years in Japan where he owned a corporate training and executive coaching firm with clients including Hitachi and 3M Japan. He lives in Lakeview with his wife and two children. He enjoys coaching and watching his kids participate in sports, cycling, camping, and traveling in general. You can find Rod online on Twitter at @roddesu, Facebook and LinkedIn.

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