Chicago Real Estate and Events

 70 Townhomes closed in the last 4 months in the Lincoln Park/Lakeview area. The closed prices ranged from $375k to 1.3K.

 An analysis for a current buyer I have showed that townhomes in this area priced between $400k-500K had final closed prices of 10-15% off of the original list price if homes were on the market for over 6 months. The listings that closed with lower market times didn’t have as much discounting off of price.  Totally makes sense.  If priced too high it won’t sell.  Sold townhomes closed at 96.38% of their Final List price. Or about 4% off of list price when buyer made the offer.

 Note to buyers- Lenders are again tightening credit and are now looking for 10% down.  Feds are asking banks to write down portfolios.  Make sure to pre-approve yourself before shopping.  Also lock in rates as this month rates have been fluctuating between 5.75 -6.25%

City has passed additional fee on city transfer tax.  The sellers will carry brunt of this tax.  Previously sellers were paying $1.5 per $1000 for selling in Chicago.  The additional transfer tax of $3.00 pr $1000 bring the cost of selling to $4.5 per $1000 or in housing terms $900 for every $200,000 of house.  This is less than the the $1500 pr $200,000 of house the buyer pays.  The sellers are taking their blows this last year but there is a silver lining.  Attendance at open houses is up.  This is the first sign of prospects looking to buy. 

Deals are getting done.  Yes, the buyers are out and the sellers are lowering prices.  There continues to be high inventories.  The less popular areas are hurting more than the popular, close to the shops/restaurants areas.  Interest rates have bounced up and down but are still at historical lows currently just under 6%.  Every price range has been hit by the slowdown however, homes are selling in each pringe range.  The key is value.  The average buyer is looking for a turnkey home.  Buyers do not want to paint, upgrade kitchens etc.  With so much to choose, the buyers are less likely to want to do work.  The exception to this are foreclosures/short sales.  Most of these properties need work and will have multiple offers come in.  Banks are holding offers for the best. 

Sellers will need to make their properties look better than others in their price range.  This doesn’t mean upgrade everything.  On the contrary, cosmetic changes, staging, &  competitive pricing gets homes sold.  5-10% drops from 2006/2007  highs may be in order depending on area and the condition of the home.

January’s mortage rates bounced across the board the whole month hitting lows of 4.5% before rising to 6.1%.  Buyers shopping for low rates should be aware that rates were changing hourly.  Note that things have slowed and rates have been somewhat consistant on a daily basis.  Current rates as of today are averaging 5.75% for 30 year fixed; an extremely good rate.  If you are looking to buy, pick your lender in advance and lock rate.  If the rates go down before you close the lender should be able to float down your rate to the current rate.

The combination of low rates and motivated sellers have made good conditions for buying and I have seen many buyers now in the process of shopping. 

For buyers, the number 1 thing to do is get financing in place ahead of time. (See above).  For sellers, reevaluate market value by having your agent redo the market analysis.  Recent sales prices are now in the system and surprisingly enough the prices are mixed depending on location, type of property, & condition.  Prices in the mid range have kept value.  Lower priced condos and high end homes have seen some decreases.

Finally, reevaluate value.  A significantly marked down property is only a value if the cost to update is less than comparative updated properties.  A home priced properly in move in condition may be more of a value than lower priced properties with a large ”to do” list.

We all know the last quarter of 2007 was a bust for the real estate market.  Now what to expect from 2008.  Word is that the Chicago market has 9 months worth of inventory.  What does this mean?  Well is we look at existing sales then it will take 9 months to clear inventory.  My boss the optimist said what if… sales aren’t as they were the last quarter.  i.e. all you buyers come out and actually buy.  Well then we’ll get rid of 9 months of inventory quicker.  As I speak I’ve got 2 calls from buyers who want to start looking.  My prediction is that we are going to see a little spurt in the next couple months and then nominal slowdown that happens during a recession.  Buyers who want to buy should be out now.   The cream of the crop inventory will go during this spurt.  Also investors can start to look at distressed & foreclosed units with the knowledge that they may need to hold the properties with a small positive (yes positive) cash flow.  Rental prices are increasing and my hope is that renters will once again see that prices have come down and why throw away money on rent when one can buy at a discount with tax writeoffs.   I’ll check-in in February to see if you buyers really are coming out of your cocoons!  Oh by the way interest rates are again down at 5.8% level.

Rates are at the 6.5% range.  Media continues to run stories of subprime loans.  Sellers have cut prices especially in the oversaturated condo market.  Prices, however, are not down as much as other parts of the country.  New development condos which come due 2008-2009 are at premiums from last year’s prices.  Developers trying to sell the last of their remaining units are making concession such as free upgrades, payment of closing fees,  furnished models etc.  (email me for more info for developments in your target area)

In general prices are within a 5-8% +/- range from last year’s price points.  Location, competition in that area, and condition of property are the key reasons for price differential.

Feds have lowered rates 1/2% which should bring out more buyers into the market.  The past month has shown a slowing of the market which will probably continue through the new year.  Historically the last quarter of the year is slow.  Some sellers have looked to renting vs. selling.

August market has slowed which is typical for this time of year.  Additional pressure from reports of forclosures.  Recent Countrywide Bank news has kept buyers cautious. Lending stricter on subprime loans.  Jumbo loans rates have spiked for the short term.  Sellers stay the course.  Buyers jump in now while the going is good!

Chicago market has been resiliant compared to the nation.  Steady sales are occurring especially in the new development market. Resales inventories are higher than last year at this point in time. Sellers should be more aware of giving their homes the needed facelift to be  competitive. Buyers can offer aggressively on homes that need work. Homes that are in model like/move in condition are moving quickly, some with multiple offers.