Midwest sees home sales boom but Chicago prices hit hardest

KANSAS CITY, Mo. -- Home sales in the Midwest surged in October as first-time home buyers sought to beat the initial deadline for a federal tax credit and difficult market conditions last year made comparisons favorable.

The National Association of Realtors said Monday there were 111,000 resales in the Midwest, up 26 percent from October last year and the best showing in the country. The median sale price for the region rose 1 percent -- also leading the country -- to $146,600.

Nationally, home resales rose 21 percent from a year ago, without adjusting for seasonal factors. The median sale price fell 7 percent to $173,100, the Realtors association said.

Economists and local real estate experts say the tax credit, worth up to $8,000 for first-time home buyers, is responsible for some of the boost in sales. The tax credit was originally supposed to end this month, but Congress recently agreed to extend it to cover contracts signed by April 30.

The Midwest lacked the big increases in home prices and frenzied selling seen along the coasts so the region was expected to have an easier time recovering. But the Midwest relies heavily on manufacturing and the unemployment rate has risen to 10 percent in October, well above 6.6 percent a year ago.

All 12 major Midwestern cities tracked in the Associated Press-Re/Max Monthly Housing Report, also released Monday, showed annual increases in sales in September, all but three by double digits. All but four showed median sale price declines.

The report analyzed sales transactions in the metropolitan statistical areas recorded by all real estate agents, regardless of company affiliation.

Here are some of the highlights from the region:

• Biggest sales gain: Des Moines, Iowa, saw the number of sales jump 39 percent from a year ago. Meanwhile, median price declined about 5 percent year-over-year to $144,000.

John Knox, an agent with Iowa Realty in Ankeny, a northern suburb of Des Moines, said 37 percent of sales in his office's pipeline are first-time home buyers looking to take advantage of the tax credit.

"Overall, our projections for 2009 were pretty dismal and it's been an exceptional year," Knox said. "We have historically low (interest) rates and we have great inventory and it's at or below market price. So we kind of have a perfect wave, a perfect storm."

• Smallest sales gain: Sales in Wichita, Kan., were the worst in the region, nudging ahead only 1 percent from a year ago. The median sales price declined 5 percent to $120,850.

The city's aviation industry has been hit hard by the economy as orders for business jets and other aircraft have dried up, leading to large layoffs. Wichita's unemployment rate in October was 7.9 percent, well above the 4.3 percent rate a year ago.

Rodney Blockyou, an agent with JP Weigand & Sons, said the market is in a holding pattern as potential customers and sellers get a feel for when the job losses will cease.

"They can give all the stimulus they want but if (buyers) are going to lose their job or are fearful of losing their job they're not going to do it," Blockyou said, referring to the first-time home buyer credit.

• Biggest price gain: Cleveland, Ohio, led the region with the median sale price rising 15 percent year-over-year to $117,500. Overall sales also rose, gaining almost 6 percent from October 2008.

Colleen Rock, an agent with Re/Max Crossroads, said she's seeing some stability returning to parts of town and more interest in higher-priced homes, possibly because people are relocating to the area.

But she stopped short of saying the Cleveland market has recovered. The city's economy is still struggling with job losses and she expects another round of foreclosures that could depress prices again.

"Without having a crystal ball, just because we're stabilizing I can't comfortably tell you we're back to a normal market," Rock said. "It might be another year."

On a related note, the Detroit market saw its median sale price rise 6 percent to $69,000, the first year-over-year increase in more than a year. Sales, meanwhile, increased 8 percent.

• Biggest price decline: Chicago, the region's priciest market, posted a 15 percent drop in the median sale price to $185,000. Sales, however, were brisk, rising 34 percent from a year ago.

Earl Ruthman, an agent with Coldwell Banker Leader Realty in Chicago, estimated 70 percent of his office's sales have been with first-time home buyers, but he's also seeing people looking to move up to the next level of housing.

At the same time, he said, cautious lenders and low appraisals are keeping prices down.

"Even if I sold a house for $250,000 and the appraisal comes out at $230,000, nine out of 10 times the sellers will have to renegotiate the price and be closer to $230,000," he said. "The appraisals are causing a lot of this fall in prices."

• Inventory highlight: The number of unsold homes fell in every Midwestern city last month from a year ago except Des Moines, according to the AP-Re/Max report. Indianapolis, Detroit and Cleveland again led the region, with inventory drops of more than 28 percent each. Des Moines added 24 percent its October 2008 backlog.

Housing experts say reducing the existing inventory of unsold homes is key to sustaining a resurgence in home prices.