It’s not ready to get discharged from the hospital yet, but it’s out of the ICU.
Thus describes the Midwest housing market, parts of which suffered mightily during the collapse that began in 2006, says David Blitzer, managing director and chairman of the S&P/Case-Shiller Home Price Index, which tracks 20 major U.S. metro markets.
“Prices in the Midwest are still not on an upswing,” says Blitzer. “They are falling and continue to fall, but prices are always one of the last things that turn up.”
He notes that the increase in home sales and housing starts over the last year is bringing inventory levels back in line, as rock-bottom interest rates and growing consumer confidence encourage buyers to get off the fence.
“Hopefully, we’ll see prices start to turn up sometime this year, but that hasn’t happened yet,” says Blitzer.
According to the National Association of Realtors, existing home sales in the heartland increased 7 percent in the fourth quarter of 2011 over the prior three-month period. They ended the year 14 percent higher than in 2010.
That’s slightly better than nationwide figures, which were up nearly 6 percent in the fourth quarter over the prior quarter, and 9.2 percent for the year.
At the same time, the association reports that the median existing single-family home price in the Midwest declined 3.3 percent to $134,100 in the fourth quarter from a year ago. Nationally, prices were down 4.2 percent.
“We are seeing inventories coming down broadly, but you do have a mix of conditions where some markets are more tied to local economic conditions than to housing market supply and demand,” said the association's Walter Molony.
Detroit and Cleveland, for example, are grappling with population and job losses, while cities like Chicago are still trying to clear out an over abundance of distressed properties, which sell at a 15 percent to 20 percent discount, weighing on market prices.
A dozen states comprise the region: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.
The largest metro areas are Cincinnati, Cleveland, Columbus, Ohio, Chicago, Detroit, Indianapolis, Kansas City, Mo., Milwaukee, Minneapolis-St. Paul and St. Louis.
Some markets, of course, have fared better than others.
Until recently, Detroit was “the saddest story of all,” says Blitzer. "It completely collapsed, as much from the auto industry as anything else.”
At its bottom in April 2011, the home price index for Detroit hit 64.5, meaning a house that would have sold for $100,000 in 2000, was selling for roughly $64,500 last spring — the lowest reading of any of the markets that S&P/Case Shiller follows.
Since then, the hemorrhaging seems to have slowed: Detroit was the only city in the index to post a positive annual return (0.5%) in December 2011 versus the same month in 2010.
“I’ve definitely priced my listings a little higher,” says Joanne Fitzpatrick, a broker with Century 21 in Farmington Hills, a northwest suburb of Detroit with good schools. “Overall, prices in our area are up about 5 percent since the beginning of the year, so the spring market is up.”
Despite new programs to loosen lending requirements, Fitzpatrick says many of the buyers in her area are still having trouble securing loans. As such, she says, “I’m seeing a lot of buyers paying cash.”
Home prices in Chicago, where the housing correction wiped out all of the equity gained during the real estate boom, are down 11 percent for the year ended December 2011, and nearly 25 percent for the last three years, according to the Realtors association.
But buyer activity in the hottest neighborhoods in the Windy City, including Lincoln Park, Lake View and Near North Side, has been steadily climbing since November, says Vince Keller, an agent with Coldwell Banker, which, like Century 21, is a unit of Realology, the largest national real estate company.
“Things are quite busy in the most desirable areas and we’re seeing multiple offers a lot more often,” he says. “Prices are not necessarily up, but we’ve got a lot more buyers and our inventory is low.”
As has been the case nationwide, notes Blitzer, home prices in the low end of the market have been the most volatile across the Midwest.
“The least expensive homes went up the most and came down the most, experiencing the biggest swings,” he says. “That’s also where the foreclosure activity has been concentrated.”
Other Midwest markets that posted a double-digit price drop for the 12 months ended in December include Milwaukee (14 percent), Cleveland (10 percent) and Rockford, Ill. (14.2 percent), according to Realtors group data.
Existing single-family home prices also fell more than 9 percent for the period in Springfield and Bloomington-Normal, Ill., about 8 percent in St. Louis and Minneapolis-St. Paul and 6 percent in Cincinnati.
Wichita, Kan. was off by more than 5 percent for the year, while Madison, Wis., and Fargo, N.D., were down roughly 4 percent. Indianapolis and Kansas City were off by roughly 3 percent. Prices in Des Moines, Iowa, were down less than 2 percent.
Not all Midwest markets, however, were in the red.
Prices in Kankakee-Bradley, Ill, which is south of Chicago, and in Grand Rapids, Mich., were up about 10 percent for 2011, along with Waterloo/Cedar Falls, Iowa, where prices were 6.4 percent higher, according to Realtors data. Green Bay, Wis., was also up nearly 2 percent.
Going forward, economists are generally forecasting housing market growth for every region this year, but Molony says it remains unclear just how fast the Midwest may find its footing.
Leading indicators, though, look encouraging.
The January Pending Home Sales Index, for example, which is forward-looking based on contract signings, was down roughly 4 percent in the Midwest from December, but is still nearly 11 percent higher than it was in January 2011, according to the Realtors group.
Nationally, the index rose 2 percent in January over December, and climbed 8 percent for the year.
“We will see gains this year,” says Molony. “The question is how much.”