CHICAGO MARKET HOME SELLERS STUBBORNLY PRICE HIGH, While Buyers Wait and Wait for "Bargains!"
CHICAGO METRO AREA REAL ESTATE SALES DOWN, AVERAGE MARKET TIME UP, COMPARED TO 2007!
Throughout 2008, our Team has seen the pattern repeat many times.
Buyers considering a home purchase delay, thinking prices will fall further. At the same time, many homesellers have their reality clock set back in 2006, and keep their asking prices too high, thinking "we can always come down!"
Indeed, here in Chicago, many homesellers still think housing woes, here and elsewhere, are a myth. Some still price their houses at 2006 levels - but no sale. Often many less-than-scrupulous Real Estate Practitioners here, almost desperate for listing business, list houses at whatever price the seller demands, exasperating the problem.
In places where the real estate market has fallen farther, faster - including California, Las Vegas, and parts of Florida - sellers have reluctantly realized the real estate market has changed. Many homesellers here in Chicago, however, don't feel the laws of demand and supply apply to them.
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.
But . . . buyers? They fail to see the urgency in buying now. Many feel better deals will come along this winter, when many stubborn homesellers may become desperate to sell.
Sellers don't only keep their prices high out of pure stubbornness. Those who purchased with high-leverage financing in the past couple of years have seen their home values going down, and, in some 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.
From the opposite angle, 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.
Of course, this situation will eventually right itself, and the market will balance. But experts do not expect this to happen immediately, or even within the next few months.
For more information, read Mary Ellen Podmolik's article in Tuesday's Chicago Tribune, with contributions by freelance reporter Robert Channick.
DEAN MOSS & DEAN'S TEAM CHICAGO
