Why 2008 Median Sales Price Is 10% Higher

Despite all the negative statistics concerning the Chicago condo market during the first half of 2008 (dollar volume down 15%, unit sales down 26%, for example), one vital statistic continues to buck the trend and surprise many people:

Median sales price for the first six months ($320,000) is still 10% above the MSP for the first half of 2007.

Why?

In response to an e-mail survey, four top condo agents offer their opinions:

Rubloff's Eric Rojas: Statistics suggest the higher-end properties, $700,000 and up, are moving, bringing up the median sales price. The move-up buyer and second-home buyer have seen deals in this market. They have the money and are no longer in bidding wars, so they can get their luxury home.

Another reason: Buyer’s expectations are very high for the level of finishes in a condo, so they still opt to buy new construction or new renovation when they can. These types of units in key neighborhoods still command a higher price-per-square-foot than older re-sale condos (even if they are sometimes not as good a value).

Buyers still have sticker shock when they see new construction sell at high prices in neighborhoods like Lincoln Park, Gold Coast/Streeterville and East Lake View. The tertiary neighborhoods with low-end units are just not recording sales, so the higher-end sales have a greater effect on median price.

Keller Williams' Marty Phelan: If you chart out the homes sold by number sold and price range, and compare it to the same graph from 2007, you’ll see that the segment of the market that suffered the most substantial fall-off is the lower priced/starter homes, typically absorbed by first-time buyers. When the number of lower-priced homes drops while the sales of higher- priced homes remain fairly consistent, the median sales price will rise.

Rubloff's Clare Zaro: The influx of luxury properties is skewing the median sales price.

Rubloff's President Jim Kinney: I think the median sale price is up because the number of first-time buyers at the very low end of the price spectrum is the most significant impact. Fewer lower-priced sales from this group does not pull the median price down as much.

Also, there were more development closings in the downtown market, especially Loop and South Loop at significantly higher prices than what was the norm, but these units were contracted for when the market was a lot stronger.

I guess I am saying that it [the 10% increase] is not a true reflection of current market conditions.

For additional insight on this topic, see related item on Dennis Rodkin's Deal Estate.