The Midwest Real Estate Data (MRED) organization, the company that provides Multiple Listing Service (MLS) services to northern Illinois customers, reported sales of condos in Chicago are down 54% so far this year as compared to 2008.  Total dollar volume fell 60% in the same period.

To be more specific, the number of closed condo sales in Chicago in the first quarter of 2009 totaled 1,349 compared to 2,920 during the same period in 2008.  The total dollar volume of those sales fell to $462 million from $1.158 billion the year before.

According to David Hanna, President of the Chicago Association of Realtors (CAR), this is due in large part to the number of “distressed” (i.e. short sale, foreclosed and bank-owned) properties on the market, the fact that they are priced below market value, and the fact that buyers are more focused on snapping up these properties than non-distressed “market-priced” listings.  It is interesting to note that, by housing type, the lowest percentage of listed properties that fall into the “distressed property” category are condos.

According to Mr. Hanna, the fall in sales volume can also be attributed to more stringent lending practices by Fannie Mae and Freddie Mac tied to the delinquency in assessments for the condo assocation and occupancy rates, which make it very difficult to get a loan for new construction or recently converted buildings.  FHA lending is also restricted to buildings having the ‘right of first refusal’ clause and buildings having four or fewer units. 

In an effort to help identify the effect that distressed property sales are having on the overall real estate market, CAR has recently undertaken an effort to separate the distressed property sales data from ‘non-distressed’ sales.  The effort is ongoing but CAR recently developed several charts showing sales for just one week in March, separating the distressed sales data, and it sheds a lot of light on how these sales figures are impacted.

One of the challenges in today’s market is trying to determine what the ‘fair market price’ is for a property, especially when there are similar properties in various stages of foreclosure in close proximity.  While there have always been differences in ‘comparable’ properties relating to location, condition and amenities, distressed properties have added an entirely new level of complexity.  Our ability to drill down and analyze this data will help us to understand the impact of these sales and provide us with more accurate and meaningful sales figures.