In mid-March Pulsenomics and Zillow published the results of their 1st Quarter 2020 Home Price Expectations survey of over 100 real estate experts. I’m assuming that the data was gathered prior to the beginning of March when we still only had a handful of coronavirus cases in the US and nobody knew what was about to hit the fan because the home price forecast was actually a bit more optimistic than it was in the 4th quarter of 2019.

Strangely, there was no press release with this survey. I’m thinking that maybe by the time they released it they already knew it was obsolete because of the scourge that was attacking the globe and they didn’t want to draw too much attention to it. I’ve got the graph below.

Real estate experts were actually a bit more optimistic about home price appreciation than they were 3 months earlier.

As you can see they were projecting 15.9% cumulative home price appreciation from 2019 – 2024. That compares to 14.9% projected appreciation in the 4th quarter of last year. 15.9% works out to 3.0% per year.

Chicago Area Home Price Outlook

As I normally do I went to John Dolan, the market maker for Case Shiller home price futures, to find out what the outlook was for Chicago area home prices. He’s actually one of the real estate experts that Pulsenomics surveys. He provided me with the graph below last week. It’s uglier than a baboon’s ass. Not the graph itself but the story the graph tells us.

These are the prices for February futures contracts for the Chicago Case Shiller home price index that was at 142.4 for January. The green and red lines were the values back on February 21 and April 3. Then all hell broke loose by the time John produced this graph for me. The red crosses are asking prices while the light blue Xs are bids. The worst spot on the graph if for the February expiration in 2021. The bid is only 107, which represents almost a 25% decline in home prices from January, and the ask is 127, which is about an 11% decline.

Take this with a grain of salt. Although I use this to get a sense of where Chicago area home prices are heading it’s not the same thing as the actual housing market. These are prices for financial instruments and they reflect the prices that somebody is willing to sell their contract for and somebody else is willing to buy them for. Obviously there is a spread wide enough to fit a house through. But, nonetheless, if someone is trying to hedge a home sale or a home purchase this is where they would have to get that hedge done. I think it’s safe to say that the outlook is not good.

Chicago home price futures paint a pretty bleak picture of our real estate market

#RealEstate #ChicagoRealEstate #Coronavirus

Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.