Is the Price Right? A Perspective on the Housing Market in Chicago
For the past few weeks, we’ve been taking you through May’s market data on where the most home are selling for below asking, and where they’re not. We’ve taken you through markets where home values and competition are heating up—Portland, Seattle, San Francisco, Los Angeles, Las Vegas, Tucson, Phoenix—as well as markets where it appears that the savvy buyer can still snag a good deal—Long Island, Chicago, south Boston, San Diego, Atlanta, Austin, and Denver.
Today we’re focusing on one market—Chicago—and the causes for its high percentage of listings selling below the asking price. Although we’ve heard some good news about the Windy City, the below market rate hasn’t dipped below 74 percent in over a year; and even if there was a slight drop from April to May, the rate is still high.
So I called up District Director, Nick Denning, and asked him a whole bunch of questions: what’s going on? are sellers too optimistic, and listing their homes too high? are values still plunging in places? are people being unrealistic about the health of the Chicago real estate market?
And he had quite a bit to say.
“What we’ve been experiencing,” Nick explained, “is two distinct sets of homes for sale. On the one hand, we have the ‘distressed’ listings, which are mostly bank-owned REOs, and are just not desirable. These homes that are left are really not saleable until drastically reduced in price.”
“On the other hand,” Nick continued, “ we have a severe inventory shortage of desirable listings. We’re seeing these homes sell in less than two weeks with four to twenty offers on each home.”
Talk about a competitive market! So a segment of the market is dragging while another is super-hot, which is why we can’t just look at the overall numbers for the metro. They just don’t tell the whole story.
“Think about the ‘desirable’ or mid to upper market as a tennis ball. We’re seeing the effect of ‘micro-market compression’, but the desirable market can only be squeezed so much before it bounces back. The desirable market has elements of core stability, such as good schools, established wealth, etc., so its bounceback has been faster than the low-end market.”
Nick continued to explain that these pockets of the mid to upper market can be just down the road from another area that’s still experiencing dramatic price declines. He also said sellers aren’t trying to undercut the market, in his opinion—they’re pricing homes fairly, and the best ones have been selling way above asking during the last few months. We can expect to see Chicago’s below-asking numbers to continue to drop during the next few months.
So there you have it. This perspective validates so many of the things we say over and over here. Know your local micro-market. Talk to your realtor for insight. Expect fierce competition and bidding for the best homes in the best neighborhoods.
Even if this means a little more footwork and a less deals on the buyer’s part, at least we can be encouraged to see housing markets all over the country gaining value as well as new buyers and sellers.
- Chicago Looking Toward Sunny Summer Sales
- Buyers: Where the Deals Are: Long Island and Chicago
- Buyers: Where You Can Find a (Relative Deal)
Sarah Louise Green lives in the San Francisco Bay Area and writes about national real estate trends, home financing, advice for buyers, and DIY projects for the home and garden. Follow Sarah on Twitter:@slouisegreen