Distressed Sales vs. “Traditional” Sales Numbers

April 20, 2009

Residential

On April 1 the Chicago Association of Realtors® (CAR) released some data that I thought was interesting in this time of dropping property values. However, I didn’t see these numbers discussed anywhere other than their web site. I think these numbers deserve a second look and hopefully some comments from our readers.

The goal of their numbers was to separate distressed property (short sales and foreclosures) from “traditional” sales. CAR is able to do this because Chicago’s MLS?Midwest Real Estate Data (MRED)?flags all short sale and foreclosures. This makes it possible to separate out the traditional from the non-traditional sales. They decided to call the non-distressed properties “traditional” because only in the last 12 months have distressed properties been of any consequence. So, as far as the MLS and CAR are concerned, distressed property sales were not common or all that significant to the larger market.

What Do The Numbers Show?

The numbers that CAR published in their blog were for only one week: March 21 to March 27, so very few conclusions can be drawn from them. However, they are quite interesting:

Traditional and Distressed Units Sold (Click to Enlarge)

Traditional and Distressed Units Sold (Click to Enlarge)

Number of Units Sold

  • 330 properties were sold in Chicago during that time period: 126 detached, 142 attached, and 62 multi-units.
  • 137 of the sold properties were distressed sales. That’s 41.5% of the sales where either foreclosures or short sales.
  • 52.4% of the detached sales were distressed (66 out of 126), only 15.5% of the attached were distressed (22 out of 142), and a whopping 79% of the multi-unit sales were distressed (49 out of 62).

 

Median Prices of Homes Sold (Click to Enlarge)

Median Prices of Homes Sold (Click to Enlarge)

Median Sales Price

When evaluating prices of properties in a declining market, appraisers use median prices for a neighborhood rather than averages. Averages can be thrown off considerably by just a few very large or very small prices. CAR provided both median and average prices for the week they did the numbers. We’ll take a look at the median numbers?they are very telling:

  • During the week of March 21 to March 27, 2009, the median price of the detached homes sold was only $125,000, $291,000 for attached homes, and a tiny $56,500 for multi-units. These are the numbers for both distressed and “traditional” homes.
  • Distressed detached homes sold for a median price of only $45,000 while their “traditional” counterparts sold for $205,000. Separating the numbers does help to see quite a difference. Distressed attached homes sold for a median price of $107,000 and the “traditional” homes sold for $313,500. Multi-units were not much different with the 49 distressed buildings selling for a paltry median price of only $36,500, while the traditional multi-units went for $287,500.

What Conclusions Can We Draw?

Again, I want to emphasize that these numbers are only from one week and it’s not possible to extrapolate very far with such a short time frame. However, for that one week in March, there were several interesting points.

The prices were obviously extremely low for Chicago. It is unlikely that in the vast majority of neighborhoods in Chicago you can buy a multi-unit building for under $300,000. However, the median for even the “traditional” sales was below that number. The other two categories were very similarly low priced.

Does this mean that during that week the vast majority of sales were in the poorest neighborhoods of Chicago? It certainly appears to be the case. It would be very interesting to see even more data like this.

Why Do This?

CAR’s 2009 president, Dave Hanna, explained that this exercise was important so people can compare “apples to apples.” If a distressed home and a “traditional” home sell in the same neighborhood or the same block, it’s important that everyone from owners to real estate agents to appraisers make it clear that they are in different circumstances and have very different prices.

Email This Post To a Friend. Email This Post To a Friend.
, , , ,

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.

View all posts by Rod Holmes

4 Responses to “Distressed Sales vs. “Traditional” Sales Numbers”

  1. Lisa Gregg Says:

    It seems, logically thinking, that the poorest neighborhoods would be the first affected by this depressed economy. That said, Chicago is such a melting pot of ethnicity & income that I think we will continue to see more neighborhoods being affected as the economy continues in its depressed state. I do think we will see more foreclosures, even as the economy is moving upward & growing stronger….it’s almost in ‘in arrears’ process as people try to hang on as long as they can to avoid foreclosure or short sales. But job loss is always a wild card & job loss has continued. I have heard news snippits that the Obama plan to assist at-risk homeowners has begun & it starting to make some change…I hope that this will continue to grow. We should ask our good friend, Brad Walbrun with A&N Mortgage, what insight we can add to this part of the discussion.

Trackbacks/Pingbacks

  1. The Home Energy Audit - Part 2 of Our Going Green Series | The Chicago 77 - April 23, 2009

    […] for any major project, like discussed in Article 1, then you need a road map. Let?s face it, budgets are tight. If you are going to do a once-in-ten-years project, you want to do it right, and you should get […]

  2. Why Have Property Values Dropped So Much & When Will They Stop? | The Chicago 77 - April 29, 2009

    […] work to produce these goods, commodities, and services. When people don?t spend money, when the Demand portion of Supply and Demand drops off, the Supply side always plays […]

  3. Mortgage Interest Rates Test Definite Strong Level of Support | The Chicago 77 - May 19, 2009

    […] lower than expected, it can actually benefit us in that it will give us an opportunity to deplete some of the existing inventory. On another note, three month LIBOR fell to 0.75%, down from a high of 4.81% back in October 2008. […]