CHICAGO REAL ESTATE MARKET CONTINUES SLUGGISH, Despite Some Positive Signs!
DESPITE MORTGAGE RATES LESS THAN 5%, INCREASE IN PENDING HOME SALES - CHICAGO REAL ESTATE STILL FEELING PAIN!
There is something wrong with this picture! Still is!
Across the U.S., and here in Chicago, Mortgage Interest Rates remain under the attractive 5% level for 30-year Fixed Rate Loans. Some rates hug 4 5/8%!
Even with the low rates, however, according to the Mortgage Bankers Association, as reported in the Chicago Tribune by Mary Ellen Podmolik, mortgage applications for new and resale homes stand at 13 year lows. Last week, mortgage applications for purchase of homes (not for re-finances) fell 4.1% over the previous week.
Figures from the National Association of Realtors on Pending Sales - homes on which signed contracts were placed, but not yet closed, increased 6% in April. Many attribute the final month of the Fed Homebuyer Credit, which offered as much as $8,000 to first-time and some repeat homebuyers when they buy a new or resale home, as the reason for the numbers spike over the last few months.
Most Real Estate Practitioners expect a falloff of Pending Sales when May numbers are released later this month.
So . . . what's happening? And why does Moody's Economy.com predict home sales will fall nationwide by 6% during the Third Quarter this year, versus the Second Quarter, before possibly picking up by the end of 2010?
Here in Chicago, our Team points to high inventory as the culprit - in virtually all price categories, Chicago Neighborhoods, and Chicago Suburbs. We're seeing distressed inventory - bank-owned foreclosed properties and short sale pre-foreclosures - drawing down average sales prices. Many cheaper-priced distressed properties in a neighborhood bring down appraised values, and often scuttle otherwise-solid deals.
Inventory of conventionally-sold, non-distressed properties remains high as well, as some homeowners who still have equity stick to unrealistically-high asking prices, and their often-fearful Listing Agents refuse to challenge them to reduce their price points. These homes don't sell, while more realistic sellers see their prices drawn down by intense competition.
And Real Estate Practitioners are finding it more and more difficult to correctly price homes in a shifting market. In an environment where many buyers wait on the sidelines expecting further price reductions, even pricing aggressively based on current comparable price data is difficult.
Chicago Condominiums in wide-ranging city neighborhoods are selling for half as much as they sold for at the peak of the housing boom here, in 2005-2006. And those that do sell are usually in ultra-prime condition, and in buildings with the most stellar financial resumes.
Investment Properties - small to larger residential apartment buildings - see a reduced pool of qualified buyers as banks are less likely to lend money to all but experienced, successful landlords. Buyers with high cash seem few and far between - and they want a big discount on their high-down-payment purchase!
And with sellers getting severely battered in the price they receive for their home or condo, they expect to make their own losses up when they go to buy - or, they often walk away!
One Indicator here in Chicago that has shown little improvement has been our Unemployment Rate - averaging 10.7% in Cook County, the county which includes the City of Chicago. We tell our seller clients that if it's Friday, and a buyer is fearful about having his job come the following Monday, he is not likely to buy a new house over the weekend!
Some positive numbers here in Chicago? Indeed!
But, apparently, not quite positive enough to turn Real Estate around here. Yet!
DEAN MOSS & DEAN'S TEAM CHICAGO
