Sue Fox, @Properties. Direct 773.816.1788
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Archive for the 'Sellers' Category
Chicago home prices slipped again in December, capping another dismal year for the Chicago real estate market. According to the Standard & Poor’s/Case-Shiller Home Price Index, average home prices in Chicago fell 7.4% in 2010. This is even worse than the 7.2% drop in 2009 (but not as bad as the 14.3% plunge in 2008.)
As a whole, the 20-city index has fallen 31.2% from its peak, according to data released this week. Average home prices in Cleveland, Detroit, Atlanta, and Las Vegas are now below what they were 11 years ago. Robert Shiller, the Yale economist who co-founded the index, said this week that he sees “substantial risk” that home prices will continue to fall — which would put Chicago (along with Dallas, Charlotte and Minneapolis) there, too. In Chicago, the home price index is already back to its March 2002 level.
Chicago condo prices, which until now have remained one of the brighter spots in our market, fared even worse in 2010. Condo prices fell nearly 12% citywide, substantially worse than the 8.7% decline in 2009 and the 7.3% drop the year before. The condo index has sunken back to its July 2001 level, making this a lost decade for Chicago condo prices.
But not everyone is lamenting. This is a fantastic time to be a buyer, obviously (if you have cash or can qualify for a loan!) Home buyers have their pick of some very choice Chicago real estate at what are now basically the lowest prices seen in a decade.
I’ve noticed that inventory is down, however — probably because so many home owners can’t stomach the idea of selling at these prices. Fewer people are listing their homes for sale than in recent years. Last week, for example, there were only 1,120 property listings in Chicago, compared to 1,552 a year ago. That’s a significant drop — 28% fewer listings in just one year. The decline means buyers have fewer properties to choose from, so the popular ones may actually attract multiple offers.
A couple days ago I met with a group of about 25 seasoned @properties realtors to discuss a weighty topic in our topsy-turvy industry: pricing. Leading the discussion was Paul Boyd, our assistant managing broker and performance coach, who emphasized that Chicago homes that aren’t selling in today’s market are, by definition, over-priced. If they were priced correctly, he pointed out, they would attract a buyer.
The realtors gathered around the conference room swapped stories about stubborn sellers who refused to lower their prices, their homes gathering dust without showings for months. We recalled others — the ones who listened to us! — who agreed to a reasonable price right off the bat and quickly found buyers. We lamented the difficulty of telling “the brutal truth” to sellers: Your property is worth much less than you had hoped.
Finally, Paul advised one of us to tell a seller (someone who was unwilling to lower her price, despite being on the market for months with no showings), “I think you should stay here.”
Because that, after all, is what it really comes down to. Do you want to move, or do you want to stay? And if the answer is move, that usually means you are going to have to lower your price. More than you wanted to. More than your neighbor did when she sold two summers ago. Maybe more than you can really afford. But enough so that buyers who are out house-hunting this spring will actually come to visit your home, realize that it is well-priced, and be confident enough to make an offer.
How much is enough? Your realtor should have a pretty good idea. Ask her or him to sit down with you and carefully explain the comps for your neighborhood and type of home, so that you can see clearly what similar properties are selling (or not selling) for. If your home is already on the market, consider how much traffic you’ve been getting and what comments prospective buyers have made.
And whatever you do, do not simply leave your house or condo on the market for months at the same price! If it’s not selling, that means it’s priced too high for the current market. And if you’re not willing to lower the price, as Paul says, maybe you should just stay put.
More evidence that home sellers often overestimate the value of their properties in this difficult market: New data from the Illinois Assn. of Realtors shows that 66% of Illinois home sellers had to reduce their asking price at least once in 2010.
The trend was particularly pronounced in the Chicago area. In Cook County, sellers agreed to 17,335 reductions per month, according to numbers compiled by Chicago Agent magazine. Cook County claimed more than half the statewide figure of about 30,000 price cuts monthly.
Home sellers in the Chicago area — one of the regions hit hardest by foreclosures nationwide — also had the largest price cuts in the state, chopping an average of 6% (or $16,000) each time they reduced their asking price.
Studies have shown that the longer your home remains on the market, the more likely a price reduction becomes. And the more price cuts a property endures, the less money you will eventually pocket. Properties grow stale, after all. Buyers aren’t so keen on homes that have been on the market for months on end, with the seller steadily chipping away at the price. Even if the home is finally priced well, many buyers will assume that the seller must be desperate by now and offer even less.
I know well, dear sellers, the temptation to just try to get a higher price, the price you want, that imaginary figure in your head that would allow you to at least break even. It’s a temptation you should avoid. The only numbers that count in this game are the comps — the sales prices for other similar homes that have sold recently. Take a hard look at what such homes are selling for, and price yours accordingly.
Otherwise you too will join the unfortunate ranks of those forced to cut the price in order to sell their home.
Sales of Chicago single-family houses and condos fell a dramatic 38.5% in November compared to the previous year, according to the latest data from the Illinois Assn. of Realtors. Prices slipped, too. The median home price in the city of Chicago was $206,000, down 4.2% from $215,000 a year ago in November 2009.
While prices seem to be looking for a bottom, far fewer properties are changing hands than in years past. If you look three years back, to November 2007, you’ll find that 1801 sales closed that month compared to 1144 this November, a sobering 37% plunge. Prices plummeted in those three years as well, sinking from a median sale price of $290,000 to today’s $206,000 — a 29% drop.
This is why we’re now seeing so many short sales and foreclosures in Chicago. Thousands of people who bought homes in 2005, 2006, 2007, and even 2008 have seen the value of those properties drop perhaps 10 to 40%, depending on what they own in which neighborhood. If they need to sell due to a job loss, move, divorce, illness or any other reason, they may find that a short sale (or even a foreclosure) is the only way out because they owe their lender so much more than the home is now worth.
It’s a vicious cycle, and it looks like it will continue into 2011. The more distressed properties pour onto the market, the more prices will be pushed down, which makes it even harder for existing owners to keep their heads above water when it comes time to sell.
Sellers will need to price their homes more aggressively than ever in the new year if they want to find a buyer. And buyers (the few that remain ready with cash or strong enough credit to obtain a mortgage) will continue to find many excellent real estate bargains and low interest rates throughout Chicago in 2011.
Today the Illinois Assn. of Realtors released its October sales data, and WBEZ housing reporter Ashley Gross called me to discuss the latest grim numbers (listen to the WBEZ interview here).
In the city of Chicago, home sales fell nearly 40% in October compared to the same month a year ago, with 1,217 sales compared to 2,012 homes sold last October. Much of the decline, in my opinion, can be attributed to the death of the federal tax credit for home buyers. Buyers last year (and for the first four months of 2010) stood to reap thousands of free dollars from the federal government if they bought a home. But once the credits expired in April, so did much of the demand from home buyers.
In Chicago — as the local realtor associations like to point out — total home sales from January through October are still up 4.6% compared to the first 10 months of 2009. That’s true, and that’s good news. Overall, our local market found some stability in 2010.
However, all of that gain came in the early months of the year. Ever since the summer, we’ve watched sales volume wither. The story is much the same throughout the larger Chicago metropolitan area as well as Illinois as a whole.
But prices have plunged more steeply in Chicago than the rest of the state. The city’s median price in October 2010 was $183,000, a 14.9 % decline compared to $215,000 in October 2009. For the state as a whole, prices fell 6.5% over the past year.
As I told WBEZ, I don’t expect a recovery in 2011, not with so many foreclosures clogging our Chicago market. Home sellers need to price their properties accordingly if they want to attract a buyer — an increasingly rare species these days.
I was just reviewing the data on Chicago home listings and closings for the first week of November. I hate to say it, but even this unseasonably warm weather hasn’t kept our real estate market from going ice cold.
Far, far fewer homes are being sold now than at this time last year, according to the latest Chicago Association of Realtors stats. For example, during the first week of November last year, 555 sales of single-family houses, condos, or multi-unit buildings closed in Chicago. But this year? There were only 273 closings in the first week of November.
That’s a 50% drop in a single year! And this year, keep in mind, interest rates are significantly lower than they were last year, making this a better time to buy. So where are all the erstwhile Chicago buyers?
I suspect that many of them, if they were in a position to buy a home in 2010, already did so. Why wouldn’t they have bought in the spring, or even last year, to take advantage of the $8,000 federal tax credit for first-time buyers (or the $6,500 credit for other buyers)? That was when my business, and that of most other realtors I know, was running at a fever pitch as everyone scrambled to put deals together before the credits expired on April 30.
Since then, as the November data reflects, real estate has been slow. Prices have resumed their steady downward slide in most Chicago neighborhoods. Fewer buyers mean fewer closings — despite record low interest rates — and fewer closings mean sellers will face a tougher time than ever.
After all, Chicago property listings are continuing to hit the market, to the tune of nearly 1,000 per week! That is fewer listings than we saw this time last year, when 1,210 homes hit the market during the first week of November 2009. But it’s only a 19% drop in listings, compared to a staggering 50% drop in actual sales that closed.
Which means that if you want to sell your home anytime soon, you will be trying to thread an increasingly tiny needle. Please call me if you need a hand.
In the last week, I’ve fielded the following inquiries from potential buyers: Can you find me a 3-bedroom house, preferably a foreclosure or a short sale, for under $200,000 in Irving Park? Another buyer asked me about how to find distressed sellers of two-flats in Lincoln Park. And a third inquired about finding a foreclosed or short sale multi-unit building in Edgewater or Andersonville.
These are the kind of calls a lot of Chicago realtors are getting these days. Buyers are looking for deals, and they are extremely wary about over-paying for real estate, even in the nicest neighborhoods. They are concerned — and rightly so, given the economic data on local unemployment and foreclosure rates — that prices have further to fall.
Meanwhile, every day hundreds of new properties hit the market in the Chicago region. Just today, according to Midwest Real Estate Data, LLC, some 730 properties were listed for sale here (while just 127 closed).
What does this mean for people trying to sell ordinary, not distressed, homes in good condition? It means you need to be super realistic, stone-cold sober, clear-eyed and steely-spined — and you need to price your property at the same level or slightly below what similar homes have sold for recently. Otherwise you will just be chasing this frightful market down, watching the market time pile up and desperately cutting your price to keep up.
Unfortunately, I’ve seen a few recent examples of sellers who refused to face reality. On the Gold Coast, I had a buyer who offered a seller almost 93% of his listing price (this on a condo priced well over half a million dollars) and the seller, after waffling for days, ultimately declined. Another Gold Coast seller abruptly pulled his listing off the market rather than negotiate an offer that came in about 10% below asking price. A few months ago, I had some buyers make an offer on a renovated house in Wilmette. But the sellers refused to take $575,000, which was a reasonable offer … and today, that same house is still on the market for less than $530,000.
Look, this is not the time for sellers to be testing the waters, fishing about to see if they can get the price they want. Only serious sellers should be in this market. If you are not prepared to compete for buyers, by ruthlessly pricing your property in accordance with the current market, then don’t even bother. You are just wasting your own time.
In the last week, I’ve had inquiries from two potential sellers who would like to sell their condos. Both have well-maintained units in popular Chicago neighborhoods (Lincoln Square and Andersonville) but, as I advised the owners, there are at least three good reasons to wait until the new year to list their homes.
1) Demand right now is extremely low. Chicago is a seasonal market, and the best time to put your property on the market is between January and May. That’s when the majority of buyers are out in force, and in a sluggish market like this one, well-priced homes in good condition stand their best chance of selling during the spring season. This year, demand is even lower than usual as we head into the fall, thanks to the government’s tax credits for home buyers. The credits were offered throughout 2009 and into the first four months of 2010, and they did the trick: Hundreds of thousands of homes sold nationwide, pushing up sales figures throughout Chicago and other wounded markets. But now that the tax credits have expired, much of the demand from buyers has also evaporated. Mortgage applications have plunged more than 30% in recent weeks (despite stunningly low interest rates.) Many people who wanted to buy this year have already done so — and this is especially true of first-time buyers looking in the $300,000-or-less range, which is where many Chicago condos reside.
2) Inventory is already climbing. More than 400 Chicago condos continue to hit the market each week, but nowhere near that many people are buying them. As demand stagnates, the number of unsold units will rise, adding to the competition your property would face if you listed it now. Will the picture be any better for sellers in the spring? It’s hard to say, since so much depends on Chicago’s job market. Some of the condos that don’t sell this year — and there will be thousands — may instead be rented out in the next six months, or their owners may give up and decide to wait a couple years.
3) Market time will add up. The number of days on the market is an important indicator of how well the property is priced and how much people like it. Most buyers would rather go see a new listing that just hit the market than a home that’s been languishing for 189 days (especially if the price hasn’t been reduced.) But if you put your home on the market in August or September, when many people are immersed in back-to-school activities or other fall commitments, you may be unveiling it to a relatively sparse audience. Market time often accrues during the fall and winter months with little to show for it, and then by the time the demand picks up in the new year, your property will already feel a little stale after six months on the market.
Waiting may be hard to do, but in my opinion many Chicago condo sellers have already missed the boat for 2010. Better to be ready to sail in early 2011 than to swim against this particular tide.
Finally someone has added up just how many Chicago homeowners are taking a bath on their property when they sell it, and the numbers aren’t pretty. According to Zillow.com, 40% of Chicago-area home sellers in March sold their home for less than they paid for it.
In the city of Chicago alone, the picture was slightly brighter, particularly for condos. In March, about 30% of Chicago condo sellers sold for less than they paid, compared to 38% of all sellers citywide.
I suspect that the true number of people losing money on their real estate transactions is closer to 50% when you factor in the commissions and closing costs that a seller owes, which can be 6-7% of the sale price. That means even Chicago owners who sell for exactly what they paid wind up in the red — often by more than $10,000.
Even more ominously, the Zillow study also found that almost 32% of Chicago homeowners who own single-family houses are now underwater (meaning that they owe more than the property is worth). This is much worse than the national figure of 23%, an indication of how troubled our local market has become.
Sigh. It’s grim out there, especially for people who already own a home. I personally know at least a dozen would-be sellers who can’t afford to sell their home, and have decided to keep if off the market for now in the hopes that prices will recover.
But for every discouraged seller, there’s an opportunity for a fortunate buyer. Real estate prices are now at their lowest point in the last seven years, interest rates are hovering below 5%, and there are tons of properties to choose from.
Ever since February, when the Federal Housing Administration adopted new rules for the approval of condos, confusion has clouded the Chicago condo market. Buyers hoping to use an FHA loan (which requires only 3.5% down) can no longer obtain “spot” approvals for the unit they want to buy, because now the entire building must be FHA approved. And condo sellers — observing that at least a third of buyers are now using FHA mortgages — are eager to get their buildings onto the FHA list.
So how does a seller obtain FHA approval? I attended a seminar on this very topic last week, and the consensus seems to be that the simplest, fastest way is for the condo association to hire a project consultant or lender for a minimal fee. The paperwork that the government requires can be cumbersome, and the condo building has to meet a long list of requirements. For example, no single entity can own more than 10% of the units, no more than 15% of the units can owe overdue assessments, the building must be at last half owner-occupied, and at least 10% of the condo budget must go towards the reserve.
There are companies like Condo Approval Professionals LLC (which sponsored my seminar) that can walk condo boards through a 2-page questionnaire to see if the building is likely to qualify for FHA financing. The cost of getting the building approved runs from $500 to $1000, depending on the number of units. And the process is now taking only a few weeks, which means a seller can get still his/her FHA-approved condo onto the market in time for the spring/summer buying season!
If you are trying to sell your condo, FHA approval will give it a huge boost in the marketplace. Keep in mind, however, that the FHA maximum loan limit is $410,000 in the Chicago area, which means a purchase price of $424, 350 or less.
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