Chicago’s market offering mixed messages

Despite declining traffic levels and longer market times, Chicago’s real estate prices are still showing surprising resiliency.

Industry survey shows low buyer confidence is keeping buyer traffic slow

Traffic to both new and existing homes declined through May and June falling below expectations of builders and area Realtors. Agents said falling prices and turbulence in the lending market are keeping buyers on the sidelines.

The latest figures from the Chicago Association of Realtors show a local residential housing market in decline. The number of residential properties sold during the first quarter totaled 6,697, a 19.2 percent drop from the first quarter of 2006. It was the poorest showing for single family homes since the first quarter of 1998, for condos and townhouses since 2004’s first quarter and for multifamily buildings since 1995’s first three months.

Other comments from Agents:

· “So many homes to choose from, buyers can just see them all.”

· “Gas prices, the war, and the media are scaring consumers”.

We expect buyers to remain hesitant as inventory continues to grow and lead buyers to view patience as the right strategy.

Number of days on the market increases

The average number of days on the market also showed a precipitous change. Regardless of the type of home, the marketing time during the first quarter rose an extra 25 to 35 days, compared with the first quarter of 2006. For instance, single-family homes were on the market for an average of 79 days in the first quarter of 2006; this year’s first quarter average marketing time was 110 days.

Modest price increases

Despite the gloomy outlook, price gains seem to be keeping up with inflation. June real estate closings for single family homes show prices a little higher than 14% over the same week in 2006. Condo prices closed almost 7% higher than the same period last year. As these closings are for contracts written 30 to 60 days ago, we don't expect to see the same numbers in July for contracts written in June.

Surprising optimism

Thad Wong, founder of @properties, sees room for optimism. “In a shifting market, there is dramatic opportunity.”

On the low end, the rash of condo conversions has raised rents, driving more renters into purchasing their first home.

“The mentality of being a homeowner is different than it was 10 years ago,” Wong said. “Everyone feels like they can and should own.”

Expecting growth

Wong predicts that @properties’ 2007 transaction volume will be $2.1 billion to $2.2 billion. In 2006, a year in which @properties acted as listing agent, selling agent or both on 4,674 properties, transaction volume totaled $1.725 billion, a 32 percent increase from 2005. In September, the company was named to Inc. magazine’s Inc. 500 list of the nation’s fastest-growing privately held companies.

Wong estimated it may take 18 months for the market’s “stabilization” to be complete. Others think he’s on target. “The fundamentals are there in terms of job creation, low interests, and the economy is growing,” said Walter Molony, a spokesman for the National Association of Realtors.

Recommendations to clients

Sellers can plan on longer market times. If you plan accordingly, your move can still proceed smoothly. We’re cautioning against testing the market with over-reaching prices. With excess inventory to choose from, buyers have an easy time of finding a better price nearby an overly-optimistic priced property.

Our strongest recommendation is not to give into the temptation to buy first, then sell. This is a certain route to losing money. (Read The Contingent Purchase.)

Buyers can definitely take advantage of the softening market by shopping around a greater selection of inventory and bidding aggressively. For the first time in a couple years, inflation caused rent increases and softening home prices are making owning a home a favorable proposition to renting.

The Contingent Purchase – or – How to Buy High and Sell Low

You’ve found a great house, one that you really want to own. However, you either need to, or want to sell your current home before closing on the purchase of your new home.

Many people have found themselves in this position and aren’t quite sure what the next step should be.

Consider this…

Let’s say your dream home comes on the market at $500,000. It’s perfect! You’re not entirely convinced the property is worth that kind of money, but you like it so much that you make an offer on the property anyway, contingent on the sale of your current home. The Sellers of your dream home are still optimistic that another, non-contingent Buyer may come along, so they’re not anxious to negotiate. You end up agreeing to pay full price, if you can get your current home sold.

You get your home ready to put on the market quickly, doing the bare minimum of fix-up and clean-up so that the house is as showable as possible. The race begins! Can you get your current home sold before someone else comes along to snatch your dream home out from under you?

A couple weeks go by with no offers on your house. Every time the phone rings, you’re afraid it might be news that someone else has made an offer on your dream home, or you’re hoping it might be the call that there’s an offer on your current home. Neither happens, so you’re stuck in limbo. The questions that start to haunt you are: “Have I overpriced my house?” and “Why is no one else making an offer on my dream house? Did I overpay for it? What’s wrong with it? Could I have bought the house for less if I had no contingency?” Now what!?

The Seller of your dream home is thinking the same thing. He’s got you “on the hook” for $500,000, but no one has come along to either buy your home and satisfy the contingency, or to buy his home and force you out of the transaction. He wants to sell, but he really can’t reduce the price he’s asking for his house to an amount less than you’ve offered. Now what!?

Well, the reality is that you may have bought “high,” and you’re likely to have to sell “low.” That’s not the best way to go, if it can be avoided, and it usually can!

Part of our job on your behalf is to create for you as many options as possible.

• Is the asking price on your dream home realistic?
• Do you need to sell your current home, or do you just want to sell it?
• Is there a financing arrangement that can be put in place to avoid a contingency?
• Should you sell your home before you even make an offer?

As you can imagine, there are about as many potential situations as there are people shopping for homes right now, since everyone’s situation is a bit different. To avoid falling into this “buy high, sell low” scenario, call us early to discuss a plan that will work best for you!

Web Traffic Analysis confirms - it's slow.

Homeowners have been asking, and we've had to confirm, it is indeed slower these last three weeks than the first five months of the year. Each of our listings had been receiving around four or more showings a week up until one week before Memorial Day. All listings have dropped off to one showing a week. At open houses, the number of visitors has dwindled from a high of 15 groups/couples down to as slow as 2 groups.

The report above from Realtor.com shows the number of views of all our listings. It's apparent that over the last four weeks, viewers of properties has dropped in half.