Chicago, IL (Vocus) August 17, 2010

Home sales activity in the metropolitan Chicago real estate market slowed markedly in July. The widely anticipated decline stemmed in large part from the fact that sales activity generated by the federal homebuyer tax credit began to fade. Sales in the seven-county metro area were 5,536 homes, off 25 percent from the same month last year and down 39 percent from the 9,022 homes sold in June of this year.

Other aspects of the market were more encouraging. The average transaction price of 4,616 was 1 percent higher than July 2009 level and 9 more than the average price in June. Average market time of properties sold in July was 154 days, 3 days less than in June and down from 173 days in July 2009.

“ Even though Congress passed a last minute extension of the closing deadline for the homebuyer tax credit, the original deadline was June 30, many transactions that otherwise would have been completed in July were hurriedly completed in June,” noted Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network.

“This meant that a meaningful number of buyers who qualified for the tax credit did so by accelerating their purchase plans, shifting sales that otherwise would have occurred in summer into the spring season.    By October, the impact of the tax credit will be concluded, and we’ll get a clearer picture of where the market is headed,” he said.

According to Merrion, one useful way to look at the market is to compare the combined results of June and July with those same months last year. On that basis, sales transactions in the metro Chicago real estate market rose from 14,534 homes last year to 14,558 this year, a gain of less than 1 percent. The average price of a home sold in the June-July period was up 1.5 percent to 4,008.

A major reason for the slightly higher average price is a shift in market activity toward higher priced properties. In 2009, 272 properties in the metro area sold for million or more during June and July. This year that number jumped to 359, a 32 percent increase.

Another noteworthy aspect of the July results was the change in the percentage of sales involving distressed properties, a category that includes foreclosures and short sales. In June, distressed sales represented 31 percent of the total. In July they rose to 38.5 percent, a substantial increase but still below the 42 percent of total sales that distressed properties represented in March of this year.

Sales of detached single-family homes in metro Chicago totaled 3,633 in July, a decline of 23 percent from the same month a year earlier and 37 percent lower than in June. The decline in detached homes sales was accompanied by an encouraging reduction in the average amount of time needed to sell one of them. Homes sold in July were on the market for an average of 147 days, compared to 174 days last July, meaning that homes were selling a full month faster. In the City of Chicago, average market time was down to 119 days, and in Kendall County it was 118 days.

As for attached homes (primarily condominium units and townhouses), 1,903 changed hands, which was 29 percent less than July of last year and 42 percent below the June total.

Looking at individual counties in the metro area, Kane County had the best result. Its sales total of 401 attached and detached homes was effectively unchanged from July 2009 when 402 homes changed hands. The largest decline from July 2009 sales totals occurred in DuPage County, where 577 homes were sold in July, a 36 percent decrease. The counties of Lake (479 units) and Will (441 units) both recorded 30 percent declines. In Cook (3,314 units), McHenry (210 units), and Kendall (114 units) counties, sales slipped between 20 and 24 percent, while sales in Chicago declined 21 percent.

Sales of detached homes fell in all seven counties in the metro area. Kane County had the smallest decrease at 7.8 percent (309 units), followed by McHenry at 15 percent (171 units), Kendall at 20 percent (88 units), Cook at 22 percent (1,886 units), Lake at 24 percent (405 units), Will at 26 percent (365 units) and DuPage at 33 percent (409 units). Sales of detached homes fell 18 percent in Chicago to 664 units.

In the attached home category, Kane County recorded the only increase for July, 37 percent, with 92 units changing hands compared to 67 last July. Results for other counties were: Cook, 1,429 units (down 27 percent); DuPage, 168 units (down 42 percent); Kendall, 26 units (down 19 percent); Lake, 74 units (down 51 percent); McHenry, 39 units (down 37 percent) and Will, 76 units (down 45 percent). In Chicago attached home sales totaled 962 in July, a 23 percent decrease from a year ago.

“Attached homes tend to attract a higher percentage of first-time buyers than do detached homes, which may explain why the end of the tax credit impacted that type of housing more heavily than it did detached homes,” said Merrion. “As it was structured, the tax credit almost certainly was more significant for those buying their first home at a modest price, than for those who were move-up buyers.”

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