I think that by now it’s clear to just about everyone that the recession has ended. But the real question is whether the recovery has yet begun. Signs of hope abound in real estate as sales, pending sales and starts are all up. The market at lower prices ranges is booming and gradually that activity will creep up the price scale, even though the number of foreclosed properties for sale increases. This is the way it has always been in real estate cycles and this one is no different. It may have been more severe, and it may have seemed that much more intense because of the wealth losses that happened, but the timing is about average for a cycle. The only questions left are the contribution of the first time buyer tax credit, and whether the credit will be extended. My answers: a lot and about a 60-40 proposition (the reverse of what I would have said a month ago.)

So that’s the good news; now for the bad. The key to any economic recovery is the creation of jobs. In the early Nineties, recovery was jump started by technological change and job creation boomed. In the early years of this century, there was no such boost and recovery was weak. We are looking at the same scenario right now. There really is no job engine pushing employment and the economy. More importantly, that technological change (as well as the emergence of a global economy) made many jobs redundant. Prosperity allowed us to ignore this; austerity requires that we face it. Each month the job loss figures become less bad; they have “improved” from losses of nearly 700,000 in January to about 250,000 in September. Eventually—probably sometime in early summer 2010— we will start adding jobs, but not at a significant rate.

But the real estate market is definitely groping toward recovery and nationally, the numbers look good. In September, sales were up nearly five percent, even though they fell slightly in the Midwest (although they are up for the year to date). Prices remain an issue, in that they fell in every sector of the country. Here the Midwest showed the best with only (!) a seven percent drop over last September.

For the Mainstreet market area all of these trends are reflected in that we have two different pictures presented by DuPage and Cook Counties. For the sections of Cook County in the Association’s jurisdiction, sales are up, and days on the market are essentially unchanged. This suggests that the sales rate has risen to the point where it matches the flow of inventory into the market. In both of these, Cook resembles the national housing market pattern. Where it deviates from this is in the area of prices. Here there has been a significant drop in average sales price, much greater than the Midwest average. Part of the explanation here may be that the market is being driven by bargain hunters and first time buyers. Both of these groups will naturally look at lower priced properties either because they cannot afford more or because they want to make modest bets on a recovering market. In DuPage county the pattern is nearly reversed. Sales are down from the third quarter of 2008, and days on the market up noticeably. And while prices have fallen less than they did in Cook County, the percentage fall is higher than the average in the Midwest.

Looking ahead, I believe that the rally in the housing market will continue in that sales will continue to improve as we move into 2010. This will be intensified if the first time buyer tax credit is extended. Right now, the Congress has already extended the credit until June 2010 for military returning to the U.S. from service abroad. That’s not an indicator, but rather a strong suggestion as to the current thinking in Washington. Prices, however, are not about to turn and it will be late Spring or early Summer 2010 before we can expect to see upward movement.

By: John Tuccillo