Hello, fellow AR folks!
We're in a good mood here in Chicago, as our beloved Cubs pulled a come-from-behind victory over the Philadelphia Phillies. The win came in dramatic fashion, as Cubs Third-Baseman Aramis Ramirez belted a Grand Slam Home Run in the 8th Inning.
Wow - my head is still spinning, and I was there!
Walking the six blocks home, I kept thinking about a Chicago Tribune article I read today, saying that, even now, many Chicago and Chicago Area Homesellers still think the sluggishness of the real estate market here is grossly overstated.
Indeed, many presume, prices have not fallen as much as some in the Real Estate Community have led me to believe. And even if they have - my property is DIFFERENT!
This attitude creates a bit of a problem for the Chicago Housing Market: stubborn sellers keep their prices too high - there are often more than enough desperate Real Estate Practitioners that will agree with them, for a signed Exclusive Listing - while buyers continue to wait on the sidelines waiting for prices to fall further.
Perhaps in markets where real estate has risen then fallen - places like Northern California, Las Vegas NV, and parts of Florida - sellers have "gotten religion" already. But, apparently, not as much here, where the price rise was not quite as dramatic during the boom times of a year or so ago, and the fall no where near as precipitous.
Chicago MLS Data for the nine-county Chicago Metro Area (from Midwest Real Estate Data LLC) indicates the number of closed transactions between January and July, 2008 have fallen 30% in aggregate since the same period last year. At the same time, median sale prices have barely budged market-wide, from $250,000 last year, to $247,500 now. (Of course, all real estate is local - many Chicago Neighborhoods and Suburbs have seen more solid price increases year over year, while others have experienced sharper declines).
During the same comparison period, Average Market Time for single-family homes and condos has increased by roughly 30 days!
When local sellers compare the relatively-stable Chicago Median Prices to the 15.4% median home price drop nationally, they become even more determined to stick it out for a higher price.
It's not just plain ole' stubbornness at work here!
Those who purchased with low-down-payment financing in the past few years have seen their home values go down, and, in many cases, their outstanding mortgages exceed the value of their home today. They price their home at the high price they feel they need, with enough left over to cover selling costs, and make a small profit for themselves.
The trouble here - the house or condo is only worth what a buyer is willing to pay for it, and no buyer really cares what a seller's previous price of financing level was. Yes?
From an opposing point of view, as in virtually any market, properties priced aggressively, and at or below today's market level, continue to sell quickly.
This past spring, Anna Colavitti priced her townhome in the Chicago IL Suburb of Schaumburg at $168,000 - roughly 10% less than what similar units sold for in 2007. She considered two offers, in multiple-bid, within the week, and accepted a cash offer of $165,000 on her unit.
She then started looking for homes with a history of price reductions, thinking she would be able to negotiate a better price on homes on the market awhile, and reduced several times.
Last May, she made a successful offer, in competition with another bidder, for a three-bedroom, two-bath home in Schaumburg. She offered the current asking price of $300,000 - and got the home! Subsequently, the home appraised for $307,000 - so she enjoyed some immediate home equity.
Now, in late Summer, 2008, more sellers are beginning the reality of pricing correctly in today's real estate market. However, far more stringent lending standards than existed even a few months ago, coupled with slightly higher interest rates, escalating prices for food and fuel, and many consumers worried about the stability of their jobs and the economy, have thinned the ranks of potential buyers.
Will the Real Estate Ship right itself? How soon?
Absolutely! At some point, inventories will fall, as prices do. New loan programs, perhaps with a little help from the government, will become available so a broader, but not universal, spectrum of home buyers can find financing. Folks will realize that real estate is really THE BEST, LEAST RISKY investment, mid and long-term.
But experts do not expect this to happen quickly. So keep those seat belts fastened!
See our post today @ BlogChicagoHomes.com, as well as a link to Mary Ellen Podmolik's article in last Sunday's Chicago Tribune, for more info.
DEAN & DEAN'S TEAM CHICAGO
Dean, great post. I think that a lot of market still have sellers with unrealistic expectation as to what their homes are worth. I also think that there are buyers with unrealistic hopes that the market is going to continue to decline causing home prices to follow. That being said, you are so right, homes correctly priced in our market are moving very briskly, while the other seem to sit.