Sue Fox, @Properties. Direct 773.816.1788
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Short sales jump 35% in Chicago
WILL IT CLOSE? That's the perpetual question with any short sale. This one, a 3-bedroom house in the Bowmanville section of Lincoln Square, was listed at $264,999. It's been under contract for three months now.
Short sales are getting a tad easier these days. That’s not to say they aren’t a pain in the neck — they are, for both buyers and sellers — but hundreds more of them are closing in the Chicago area, and nationwide, as banks finally realize that in many cases this is a better outcome than a foreclosure.
Why are short sales so difficult? The answer is that someone — a bank — will lose money. With a short sale, a borrower is trying to sell his/her home for less than what they owe on the mortgage, sometimes considerably less. In order for a short sale to close, the lender must agree to the loss, and banks by nature don’t want to lose money. Many banks are also swamped with mortgages gone bad, and they typically take months to respond to a short sale offer. And sometimes they say no.
Right now, I have three different short sale deals under contract with various buyers. One was supposed to be ready to close “right away,” since several previous deals had fallen through and the bank had already approved the list price. But it’s been more than a month so far. The other two deals will probably drag on for much longer, since the banks involved have yet to approve a short sale or even respond.
Still, short sales are on the rise. According to a story yesterday in the Chicago Tribune, there were 907 short-sale transactions in the Chicago area in January alone — a 35% increase over a year ago. Foreclosures, however, accounted for twice as many sales.
Nationally, too, more short sales are being completed. An estimated 105,000 short sales closed during the first quarter nationwide, the highest number in three years.
I still don’t advise attempting to buy a short sale if you’re on any sort of a timeline. But if you have months to spare, and plenty of patience to boot, you could give it a shot. More deals seem to be closing, and you’ll probably get a good deal on the price. Short sales sold at an average discount of 23% in January, the Tribune said, while foreclosures sold for 29% off.
The return of the multiple offer
MULTIPLE OFFERS AT PARK TOWERS: Located at 5415 N Sheridan, this popular high-rise overlooking the lake in Edgewater offers studios and 1-bedroom condos at relatively low prices. One of my buyers was recently in a multiple offer situation here, with the winner paying nearly full price, in cash, and closing about two weeks later.
With home buyers streaming through Chicago neighborhoods this spring in search of a bargain, I’m beginning to see a phenomenon that hasn’t reared its head much in recent years: the “multiple offer situation.”
Dreaded by home buyers but embraced by sellers, this pulse-racing affair occurs when more than one buyer makes an offer on a property at the same time, sometimes within the space of hours (or even minutes). The seller’s realtor will then advise all parties of the “multiple offer situation” and often ask everyone to submit their so-called “best and final offers.” Sometimes, however, one offer is so outstanding that the sellers will decide to negotiate further with only that buyer, leaving the others by the wayside.
I have been extremely busy during the last month, taking various buyers out to see properties as soon as they hit the market and helping submit dozens of offers (hence my recent lack of blog posts!) Many of our offers have been negotiated and accepted, but I can think of at least five that wound up competing against stronger offers and losing out. The bidding wars weren’t confined to a single price range, either; I saw them cropping up anywhere from a $130,000 condo in Edgewater to a $650,000 house in Ravenswood. In two situations, I was representing an investor who was bidding against five to ten other offers (often cash offers) for houses in Irving Park or Portage Park.
It is becoming commonplace to run into other buyers looking at the same property, and to hear the seller’s realtor mention that he/she has showed the home seven or eight times in one day. By the end of March, I was advising my buyers to move quickly if they really liked a home — especially if it was priced well and in good condition. It’s always better to be the first one in and get the property under contract than to wind up paying more because someone else wants it too.
Sue Fox interviewed on WBEZ
This morning I was interviewed by WBEZ housing reporter Ashley Gross about the low prices of foreclosures in Chicago. Buyers can expect about a 50% discount off regular market prices when buying a foreclosure in the Chicago area, according to data gathered in the fourth quarter of 2011 by RealtyTrac.
But, as I cautioned WBEZ listeners, that’s often because foreclosed homes are in lousy shape and need work. Single-family houses that have been seized by lenders sometimes have leaks, mold, damaged floors and other problems. Many of them are missing kitchen appliances, and occasionally they’ve even been stripped of copper plumbing (which thieves find valuable). No one is living there — often for months — and the neglect takes its toll. Foreclosed condos, too, can spring leaks (I have seen two where the refrigerator leaked in the vacant unit, damaging the condo downstairs as well.) And they often are found in buildings with other distressed condos, which can mean the building itself is financially unstable and thus it will be difficult to get a mortgage there.
Remember how a home winds up in foreclosure to begin with: its owner couldn’t afford it. That usually means the owner couldn’t afford to maintain the home, either. Rare is the foreclosed property that is in sparkly new condition.
Anyway, most of this didn’t make it into Ashley’s interview because the final cut was only 30 seconds long… but here is the link in case you’d like to hear it:
Lincoln Park house prices fall, but condos hold their value
$460K OFF SALE: This 4-bedroom "majestic greystone" in Lincoln Park was priced at $1,550,000 when it hit the market last spring. Six price cuts later, it was being offered at $1,090,000 when it went under contract a month ago. Such steep discounting is no longer rare in Lincoln Park, where single-family house prices have dropped precipitously.
In many Chicago neighborhoods we’ve been seeing condo prices falling steadily, while the price of single-family houses has tended to hold up a little better. This is the case in places like Lincoln Square, Uptown, Edgewater, Rogers Park, West Ridge and Logan Square.
In Lakeview and North Center, which are two of the most popular North side neighborhoods, both condos and houses have held their value and prices have even slightly increased over the past two years.
But in Lincoln Park — another popular neighborhood, and one of Chicago’s most expensive — I’m seeing condo prices hold steady (with just a small 3.3% decline over two years) while single-family house prices have fallen steeply. The median single-family house price is now $1,280,000 in Lincoln Park, a 22.4% drop over two years earlier, when the median was $1,650,000.
This plunge suggests the difficulty of selling high-end houses in a time of uncertainly and austerity. In Chicago, only the Near North Side (home to Old Town, the Gold Coast, Streeterville and River North) now boasts higher single-family home prices than Lincoln Park, with a median price of $1.6 million. But that figure also reflects a major drop, down 25.6% in the last two years.
I think there could be something more at work, though. Maybe some luxury buyers are choosing the suburbs over the city? Over the past two years, single-family home prices have held relatively steady across much of the North Shore, including Wilmette, Winnetka and Glencoe.
More Chicago buyers shun condos and choose houses instead
HOME SWEET HOUSE: More Chicago buyers are bypassing condos in favor of single-family houses. This 3-bedroom Irving Park house on an extra-large 50x163 lot recently sold for $225,000. It had a newer roof, but the listing noted that the house "will need some updating."
I’ve witnessed an interesting trend emerging in recent months, just by watching my own buyers as they move through the home-hunting process. And now I have some hard data to prove it: Chicago buyers are increasingly buying single-family houses, often skipping right past the condo stage that was once the point of entry for first-time buyers.
Five to ten years ago, if you were a North side buyer approved for a loan of $200,000 to $400,000, your best option was often to buy a condo if you wanted to live in a lively neighborhood with plenty of restaurants and shops (and sometimes even the lake) within walking distance. The Loop, South Loop, River North, Bucktown, Wicker Park, Lincoln Park, Lakeview, North Center, Roscoe Village, Lincoln Square, Andersonville, Uptown, Edgewater — all of these areas were bursting with new condo developments that made the most of city living at prices that were affordable for first-time buyers. Most of these folks never even considered buying a single-family house.
But today, Chicago housing prices have fallen so far that decent 3-bedroom houses can now be had for the price of a condo. The demand for single-family houses has climbed rapidly, with 37 percent of Chicago buyers choosing a house in 2011, according to data gathered by the National Assn. of Realtors. Two years ago, only 27 percent of buyers made a similar choice.
Likewise, the appetite for condos has waned. Just 39 percent of Chicago buyers opted for a condo in a building with at least five units in 2011, compared with 54 percent in 2009. (The rest presumably bought townhouses, two-flats or some other type of residential property.)
Among my buyers, the shift seems to be happening because they realize that by compromising a bit on the neighborhood, they are able to find a house for $200,000 to $300,000. These houses generally are neither large nor new. They tend to be around 1200 to 1600 square feet (often a bungalow, a ranch house, or an A-frame home) and they often need some cosmetic updating, especially things like refinishing the floors and renovating the kitchen and baths. But they usually offer all the appeal of a single-family house — including a backyard, garage, and basement, while NOT including a condo association, upstairs or downstairs neighbors, or monthly assessments.
“I never dreamed we would be able to afford a house,” one of my buyers recently told me. But more and more buyers can — particularly if they are willing to look a bit further west than they may have lived previously. Instead of the neighborhoods mentioned above, areas like Irving Park, Albany Park, Avondale, Logan Square, Portage Park and Jefferson Park are now attracting Northsiders who want a house but may only have $250,000 or so to spend. At price points around $300,000 and above, you can sometimes find newly rehabbed houses with finished basements in these neighborhoods. There is literally nothing to do but move in (which, in years past, was often the appeal of many new and gut-rehabbed condos.)
Chicago home prices sink again
ANOTHER FORECLOSURE: This 4-bedroom, 2-bath house in Albany Park just closed for $160,000 -- which is roughly the median price these days in Chicago. It was a distressed property, like almost half the sales now taking place in the city.
The latest figures are in for December home sales, and once again, prices have slipped in Chicago as distressed properties gobble up nearly half the market.
The median sale price is now $156,000 in Chicago — a 6.2% drop from December 2010, when it was $166,250. Back in the robust days of 2005, 2006 and 2007 before the housing market crashed, Chicago’s median price stood between $279,000 and $287,000 each December. So you can see how dramatically local prices have fallen.
But the price plunge is deepened by the kind of properties now selling. Nearly half the homes trading hands, about 45%, are foreclosures or short sales. Many people may imagine that these homes are fabulous deals, attractive houses or condos sold well below market value. But as a realtor who actually tromps through these distressed properties on a regular basis, let me assure you that a lot of them are in crummy shape.
Foreclosed homes are vacant, and vacant homes invite leaks, mold, animals, vandalism and occasionally even squatters. They are often missing their kitchen appliances. An angry former owner may have damaged the home on the way out. Stained carpets, holes in the drywall, buckled floors and other maladies are common. Short sales, on the other hand, are still owned by a financially-strapped homeowner, so while they are often occupied, they may have been the victim of deferred maintenance for years. Sometimes tenants live there, and many times these homes are not in great shape by the time a short sale is finally completed.
Every once in a while you do run across a distressed property that is in good condition, but I would say that is the exception in most Chicago neighborhoods. The point is, with so many foreclosures and short sales now in the mix, Chicago’s home prices have been dragged down by the sheer weight of all these lower-end properties.
This phenomenon has made it very tough for ordinary sellers (who aren’t in foreclosure or attempting a short sale) to compete on price, particularly in areas with a lot of distressed homes like Rogers Park, Uptown, or Albany Park. Many people are opting to stay put (or try to rent out their homes) rather than sell in this environment.
Luxury home sales dive in Chicago
MILLION-DOLLAR HOUSE: This nearly new4-bedroom house, located in North Center in the Coonley school district, sold in November after less than a month on the market. The sale price was exactly $1,000,000, though the home was listed for $100,000 more.
The highest end of Chicago’s housing market took a beating in 2011, with sales of homes for $1 million or more falling 14.4% over the prior year. Only 539 such properties sold in 2011, compared with 630 homes in 2010.
Luxury condo sales were particularly hard hit, according to a recent story in Crain’s Chicago Business. Sales of million-dollar condos plunged 29% to 259 units, compared with 364 in 2010. The decline was partly attributed to the fact that no major new luxury condo developments were completed last year.
But the uncertain economy and troubled real estate market also certainly played a role. Many people are holding off on big-ticket purchases, and million-dollar homes are taking longer to sell. There’s a year-and-a-half supply of luxury homes sitting unsold throughout the Chicago area, Crain’s reported.
On the ground, I’m seeing some of these single-family homes endure multiple price reductions, occasionally to the point that their original asking price is sliced nearly in half. Often homes priced slightly above $1 million will sell for closer to $850,000 or $900,000. On the other hand, new or recently-built homes in hot school districts tend to sell quickly, with less of a discount off the asking price.
A bright spot in North Center: Single-family home prices up 7.5%
ROSCOE VILLAGE CHARM: This renovated 3-bedroom in the heart of Roscoe Village sold in 2011 after just three weeks on the market. Located in the Audubon school district, it featured large bedrooms, a finished basement and a backyard with a deck. Priced at $669,900, it sold for $625,000.
While home prices in most Chicago neighborhoods have been steadily falling, North Center — a desirable area with good schools and walkable neighborhoods like Roscoe Village — is bucking the trend. In 2011, the median price for a single-family house here rose to $805,000, a 7.5% increase over the year before.
More of these lovely houses are being sold, too. Sales of North Center houses soared almost 23% in 2011.
Condo prices in North Center, meanwhile, have held steady, ranging from a median of $365,000 to $370,000 over the past three years. Considering that condos in many other North Side areas have fallen at least 10-20% in value in recent years, North Center is definitely holding up quite well.
As the new year begins, I have two buyers looking in North Center, both young couples with children interested in homes available here in good elementary school districts such as Coonley, Bell and Audubon. And despite the relatively high median price of $805,000, you can definitely find an updated 3 or 4-bedroom house in North Center for considerably less money. More than 30 houses, many of them century-old homes that have been renovated, sold for $500,000 to $700,000 in 2011.
Buyers on prowl for bargains in 2012
SELLING SHORT IN WEST TOWN: It's been a long road for this short sale, a modern 5-bedroom house located at 1634 W Erie. It was built in 2006 and originally priced just over $1.2 million. But despite being billed as a "smart" house with skylights throughout, high-end appliances and a media room with stadium seating, it never sold. By 2009 it was marked down to $680,000 and offered as a short sale. It's been under contract -- but failed to close -- four times in the last two years. The home is now priced at $615,000 and the listing says it's an "approved short sale" that can close in 60 days.
Happy 2012! Especially if you’re a home buyer.
From what I’ve been seeing over the past few weeks, Chicago buyers are already out shopping for their next home. Even during the height of the holiday season, I witnessed: One of my condo listings go under contract two days before Christmas, two separate buyers (in the Loop and Uptown) who are preparing to make offers this week, and another three new buyers who are starting their single-family home searches (in Bucktown, Irving Park, and Andersonville).
Home sales are on the rise throughout Chicago… but home prices are not. And neither, for the time being, are mortgage rates. That’s why it’s such an incredible time to be a home buyer. At no other moment in the past decade could you find home prices so low in Chicago (the median is now $160,000, nearly back to the levels of 1999), nor interest rates hovering below 4% for a 30-year fixed mortgage. Savvy buyers with solid income and credit scores are seizing the moment — and many people are simply paying cash for their properties these days, if they can afford it.
A major trend in 2012 will undoubtedly be the flood of foreclosed and short sale properties hitting the market; they already make up almost half of Chicago’s home sales. Illinois now ranks fourth in the nation for foreclosure activity, with 12,398 properties receiving foreclosure filings in November alone. In Cook County, foreclosure activity jumped 20% in November, according to a recent story in the Chicago Tribune, which attributed the rise to a 57% increase in homes sent to court-ordered auctions.
Buyers are out there, but they are definitely looking for bargains in 2012. And with homes now selling for about 30% less than what they commanded just a few years ago, bargains are not hard to find. It’s much harder to find home sellers — particularly the traditional kind who aren’t in foreclosure or attempting a short sale — willing to accept the new market reality and price their properties accordingly.
Chicago home prices drop 12% in year
- UNDER CONTRACT IN ANDERSONVILLE: This 4-bedroom house, listed at $524,500, found a buyer this month after more than a year on the market. The price started at $699,000 and was cut multiple times.
Merry Christmas! I hope everyone is enjoying the holiday season this year.
I just wanted to give you a quick update on where prices are heading: Down, in a word. The latest housing data from the Illinois Assn. of Realtors shows that Chicago home sales are picking up, but prices have continued to fall throughout 2011.
In November, sales of single-family houses and condos in Chicago totaled 1,377 — a 20.4% jump over the previous year. But nearly half of them involved short sales or foreclosures, troubled properties that are often sold at a discount. That’s the main reason, in my view, that Chicago’s median price has continued to slide.
The median price for a Chicago home sold in November was just $160,000. That’s 12.3% lower than it stood in November 2010 — and a startling 45% decline from the median price of $290,000 in November 2007.
Check out the plunge, year over year:
November 2007: 1859 sales and median price of $290,000
November 2008: 1093 sales and median price of $222,500
November 2009: 1905 sales and median price of $215,000
November 2010: 1144 sales and median price of $182,500
November 2011: 1377 sales and median price of $160,000
It seems that our local market is stabilizing as far as sales go, albeit with a lower volume of homes changing hands. But prices have yet to bounce back by any long-term measure. They may increase slightly for a month or two, but year-over-year home prices have declined for about half a decade now.
As the new year approaches, it looks like it will be a stellar year for home buyers, who now enjoy the lowest prices in 11 years and the lowest mortgage rates in more than half a century. Homeowners, however, will continue to suffer and sellers who are truly motivated will have to lower their asking prices to match this sunken market.
Recent Posts
- Short sales jump 35% in Chicago
- The return of the multiple offer
- Sue Fox interviewed on WBEZ
- 3 ways to improve your house hunt
- Lincoln Park house prices fall, but condos hold their value
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