Just reviewed some fairly recent statistics compiled by Discount Real Estate Broker ZipRealty, and reported by Mary Umberger, Real Estate Columnist for The Chicago Triubne. The numbers are a bit unnerving!
In aggregate, unsold inventory of homes and condos increased 1.2 percent in February, comparing with January, 2008. In the Chicago Metro Area, inventory climbed by 2.7% between January and February, and today's inventory level is up 17.2%, as of the end of February, 2008, versus February, 2007.
As of February 29th, 72,842 homes and condos were active and for sale throughout Chicago and the suburbs, and 38% of these sellers had reduced their asking price at least once during their listing term.
How are our clients reacting? In some ways we may have predicted, and other ways that have surprised us!
Some observations -
1. Buyers see more value in today's real estate market here in Chicago, but they are waiting for prices to go down even further. Folks read the papers (although, usually, they read them ONLINE!) They see predictions of further price erosion. They either want the perfect discount deal NOW, or they say they will wait, indefinitely, until that perfect deal falls into their laps. When we tell them "It's difficult to time the market so precisely," they stubbornly resist our suggestions.
2. Buyers feel they can purchase ANY property AT THEIR LOW PRICE, period. Many are brazen - offering 20 or 30 percent lower than asking price, and refusing to budge when counter offered. Others offer more reasonably, versus current "today" comparables, but then try to get money or unreasonable repairs during the inspection period, within five days after contract acceptance by the seller. Funny thing - often times, the sellers give them what they ask for, no matter how unreasonable!
3. Sellers are at first surprised, then angered, by how the market has eroded their value, and potential asking price. Recent informal surveys by RealtyTrac indicate that 7 out of 10 sellers feel their property value has been stable, or even appreciated, over the past year, despite what they hear in the media. Some clients disbelieve you when challenged on value - others understand how the market has changed, but they are now putting off their plans to move! When we say price recovery will also mean the price of the new home you want to buy will go back up as well - they often don't understand, or they disagree!
4. Sellers and Buyers don't really understand what has happened to the mortgage market. It is very difficult for many to understand they can't find that high-leverage, low-interest-rate, no-doc loan anymore. "It's got to be out there somewhere," many think. When they can't find the same favorable terms as they might have found two years ago - they retreat back into the Valley of Indecision!
5. Agent loyalty - from both Listing and Buyer Clients - is waning! Back in the day - a couple of years ago, things happened quickly in this business. You listed a properly-priced home, condo, or investment property, it sold quickly, very close to the asking price. Inspection issues were easily deflected - the buyer's didn't want to risk losing their "rare find" of a home. Advertising costs were kept to a minimum, since a lot of marketing was not required to sell a home. Now, lack of early success puts everything a Realtor does under a magnifying glass! "You didn't advertise enough, or do the right advertising, or do enough Open Houses," and on, and on!
Buyers become frustrated when they can't get the house they want at as much of a discount as they would like. "Perhaps you're not really working for me," some claim to their Real Estate Practitioners. Higher interest rates and more stringent loan terms - must be your fault.
Sellers and Buyers more easily want to defect!
6. Buyers, and Sellers, quickly SPREAD THE WORD on what THEIR take is on today's Real Estate Market. On and on, these possible Realtor referral sources spread bad karma about the market today, and, unfortunately, the Realtor's role in it. If not pre-framed and kept under the proper light - this could hurt an agent's tomorrow business!
Our post yesterday at BlogChicagoHomes.comprovides a bit more insight, as well as a link to Ms. Umberger's column in the March 16th Edition of The Chicago Tribune.
DEAN & DEAN'S TEAM CHICAGO
Thanks for such an informational post. Sounds like you have a tough crowd out there. I was just in Chicago for 'The Taste of Chicago', July fourth.
The Bay area housing market continues to adjust with so many distressed properties on the market. Upscaled community are the exception to the current norm. Keeping up is a day-to day-challenge. Has your market also continued to adjust as well?
Dionne -
I would guess things here aren't as tough as they are in the East Bay - no block after block of foreclosures, crazy media coverage, no "bus tours" yet.
Folks just seem to be uncomfortable, frustrated with the "New Market Reality."
As prices fall a bit, more fence sitter buyers will jump off, and the market will begin to equalize. Hopefully, that will come soon (already have seen a few signs of it during last couple of weeks).
Drop in or Call Anytime!
DEAN & DEAN'S TEAM CHICAGO