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I disagree with house prices going up over the next year. I and most economists outisde of the NAR forecast more months of price declines. So long as inventories are at 10 months prices will not increase.
Please note that while I am looking to buy a property over the next year or so I already own two properties in Chicago that I don't see going up in value for the next 1-2 years (humbildt park and itasca).
Waiting for short sales and foreclosure opportunities does not make a redneck. At best it makes me a savvy investor and at worst an opportunist.
The housing market isn't close to bottoming out and sellers around here aren't budging hardly at all in asking prices. Why would you want to buy when as soon as you sign the value of your house is going to go down?
REPLY: Its a Buyers Market right now, overall. If some Sellers dont want to budge on thier price, theres plenty others who would be glad to to sell thier home. House values will rebound again as they do after each and every housing slump we've had. It is a good time to buy especially if you are a first time buyer or want property as an investment. 30 year mortgages can still be gotton for 6% or slightly higher.
While I agree, it is a buyers market, it does not mean that because of it, all listings out there are overpriced and need to come down to match the sellers who are in desperate financial situations, forcing foreclosure prices for all priceranges. I feel like I am beating my head against a brick wall. I would not fault ANYONE who wants to go through the noghtmare of buying a bank-owned home and all that comes with it. I speak of a higher price bracket where the buyers are not first time home buyers, not buying delapitated homes to "flip", or for investment purposes. This is not the case in homes in most all Suburbs of Chicago. The city itself, prices are rising for location, new construction, etc. and while agree it is a GREAT time to buy, especially for first time buyers or investors, the buyers in any other scenerio they are looking to buy, are not buying, but sitting around, waiting for "the bottom to fall out" and I just don't think it will. At this point, they are not buying becasue they can't sell their own home in a lower price bracket, can't afford 2 mortgages in case they don't sell their current homes, and overall, just paranoid that if they do buy something that is currently on the market, something better will come along. I don't consider this a "Redneck approach" and apologized in my previous email for the name references I did make. But these people, most of them, are not literally waiting for a "good deal" and I can assure you, in our western surbuban area, prices are not dropping and if they are, it's by very little. peolpe who are on the market, 97% of them are not in a suituation where they MUST sell or it will be the end of them. We are riding tough times and are confident that it will take a turn, sooner than later. I would like an opinion on what anyone thinks about listings that are truly at fair market, less than 2005 prices, and still selling, but at a slower rate. In our case, the inventory is great in this area, we lose out to Naperville on several occasion, and while we have always understood WHY, people are not thinking as clearly as they used to where community, shcools, commutes, etc.. are concerned. Naperville dist 203 is every bit as expensive as the Glen Ellyn, Wheaton area, and dist 204 has the newer, bells and whistle homes on tiney lots with high taxes and what everyone seems to be going for in our price range. So it's not that they are getting "good deals", they are still paying 500-600,000 dollars for homes of equal. Same with the north suburbs. We all know the Winnetka, Glencoe, Lake Forest areas drive a much higher price for less house than this area and respect why. It is what it is. Smae with Hindsdale, Counrtyside, La Grange, etc... So I think as a conclusion, we are just talking about 2 differnet types of situations.
The "BUYERS" mentalitiy has been created on much false information, again, by the media, and all I am trying to do is get a voice out there that says this is really NOT the norm, even though they are being told it is. So bargain hunting, low balling, complaining about the worng paint color, or anything else that this atmosphere has created is what needs to stop, at least in this price range. If people want to buy, they should buy. After all, it IS a buyers market, isn't it? Well, buyers need to get off the fence and start to make it happen again. I might ad that we did, and are living just 4 blocks from where we lived and still own. While we built for a "better deal" than you might have 3 years ago, it is not by a gross amount. I probably would have cost $50,000 more, with all the upgrades, etc.. and we saved on builder incentives. But certainly, we did not bargain hunt.
Both sides have completely legitimate concerns. Six months ago I was a seller. Today, I'm a "fence sitting" buyer.
You think falling prices are unhealthy for the nation and economy. Here's a counterargument:
Beginning in 1994, prices began to spiral up and beyond where they had been historically in relation to incomes and inflation. This happened EVERYWHERE, whether it was gradual or sudden. Claims that a market didn't have a "big run up" are speaking in relative terms. Probably 85% of markets had a BIG run up. Maybe 5% had a MASSIVE run up. Regardless, prices still got way out of whack.
Now there are BIG and MASSIVE price drops happening (yes, I believe they will continue). Perhaps prices will once again land at a more typical level in relation to inflation and income.
Is that unhealthy? Really?
It's just the flipside.
As for 14% interest rates you are absolutely right. One day soon, we'll see 9% and maybe more. And how much do you think today's 520k home will sell for when that happens? What happens to that monthly mortgage payment?
Still think your home will be worth more in 5 years? 7? 10? How much more?
Buyers don't have a crystal ball and neither do sellers. But both sides have legitimate concerns. I wouldn't fault a seller for holding out on price (although I would feel bad for them, believing they'd ultimately chase the market down). I also won't fault buyers who are attempting to negotiate crazy deals.
My own strategy is to wait for the "perfect" home, so even if the price tumbles and doesn't recover for 10+ years, I'll never feel like it was a bad choice.
Both sides are talking about the biggest pile of money they will ever exchange with someone else. Can you really blame anyone for either asking too much or offering too little?
I see your perspective and can sympathize with the frustration. I get frustrated too. You say, "If people want to buy, they should buy." Shopping dozens of listings that have been on the market for 6+ months with no price drops, my answer is "If people want to sell, they should sell."
One day we will all look back on this and not laugh.
I just realized that everyone that has commented on this subject in the last few days needs to go back and read the first page, where some very legitimate points were made by gardener34, donkeyteeth, aragx6 and the last one on that page by gardener34 again. It really puts closure on what I have been trying to say, even though I've gone in circles at times, from the beginning.
Cohdane, you make some good points. But as a "fence sitter" for 6 months, what exactly, at this point are you waiting for and looking for that has not come up already? I can assure you, your decision will not be a bad one and for listings that have been on the market for 6 months, not dropping, the reason is because they were listed below what they normally would have been and lower than comps in their areas because the real estate agents told them that if they listed low, they would sell faster than listing high and playing the "price drop" game. This stategey went on from '06 to '07 and now if you look, list prices are STARTING where they ended up dropping to. So I truly want to know, what is the perfect house for you, in what community, what are your priorities where location and schools are concerned, and most importantly, what pricerange you are looking in as a 30 fixed rate of 6% will surely not be a bad decision, in any scenario at this point.
This thread has opened up again, for a reason, and I hope it reaches thousands of buyers out there, such as yourself, to get out there and "buy"! GO find your perfect home, be open minded to what can be changed, cosmetically, if not to your taste, and see the big picture. Also, pay attention to what the tax bill will be on your new home. Unincorporated areas of many burbs are definately advantageous and real estate agents often do not "point out" these little details. The taxes are a HUGE part of a monthly payment around here and can only increase, unfortunately, with time. Good luck and of course, if at all interested, I encourage you to look in unincorproated Wheaton, where we are attempting to sell, and are listed lower than last years "sales". A beautiful town with excellent schools, and one we have personally lived in for 17 years and stayed in when we built last year, down the road. Our 4 kids did not have to change schools, even within the district. We are flexible, to an extent, on the asking of our home and would certainly entertain a reasonable offer. Good luck and happy househunting!
Housing is the Chicago region was NEVER as crazy overpriced by any yardstick (median price, percentage of income, cost/sq ft) as in the markets like virtually all of California, NY Metro, portions of the pacific NW, Houston metro, Las Vegas etc...
Rates are mostly affordable for people with solid credit and 'normal' sized down payments.
In the nearish term (2-5 yrs) I don't see any major downward pressure on income in the Chicago region, and the overall trend demographically is better than just about any other place in the nation. Young people LOVE to come to Chicago. When they do the STAY, raise families and NEED a place to live. All good things.
Inventory of available housing is deep as you could want and the price range in most towns has expanded dramatically. The "teardown hunters" and flippers are out of the market, so that makes many houses that need some updating fit real well into the classic "fixer upper" pricing that is the #1 way to add value to a property/communites.
At the other end some of the "rules of thumb" that held for decades are back in voque -- homes selling for about $300K should sell about 90 days, for every 100K more than that you can toss on other month or so. For homes that have been sitting for longer there may very well be something out of whack about their pricing or there features or even the target marketing. It is sort of crazy to expect "first time buyers" to be ready to take a $600K plunge, but that ought not be to painful a stretch for move-up buyers or 'luxury" buyers. The old ways of reaching these buyers still make a helluva lot of sense. Realtors that have weathered other downturns know that some postcards and networking can do a lot to wake up reluctant upgraders...
I'm waiting for the perfect house because I wholeheartedly believe prices will go down A LOT. I'm not waiting for the prices. I'm waiting for a house that won't make me cry if I end up taking a bath, which I believe is likely if I buy any time soon.
As for describing the perfect house-- I have in other posts and won't bore more people with it here.
Also, I didn't say no one was dropping prices. If no one was, I'd have a lot more confidence in the market. The fact of the matter is, I've just gone through the stack of listing sheets I've gotten at open houses-- here are the price drops from just within the last 6 months (if anyone wants addresses for confirmation, message me and I'll send them). Keep in mind, some of these listings were already reduced from original list price when I went to their open houses:
475 to 439k, 419 to 415k, 695 to 649k, 599 to 580k, 699 to 675k, 682 to 679k, 559 to 549k, 479 to 449k, 469 to 449k, 699 to 665k, 849 to 797k, 629 to 529k, 699 to 649k, 729 to 699k, 595 to 575k, 600 to 579k, 499 to 465k, 729 to 719k, 535 to 499k, 849 to 799k, 675 to 639k, 599 to 574k, 561 to 539k, 550 to 500k.
These listings are in various northern suburbs of Chicago. The majority of them are still sitting on the market after these price reductions. I have a total of FIVE properties in my stack that sold-- some with price reductions, some without. There are also nine that haven't changed their price one penny.
With no less than Warren Buffett, George Soros and the CEO of Fannie Mae telling me that prices will continue to decline for the foreseeable future, why exactly should I run out and buy anything less than perfect? It's ugly and scary out there and I'm not a financial masochist.
For what it's worth, I've only asked to tour one home with my realtor. I thought it was a terrific house priced fairly. My son (who has special needs) would've had to cross a four-lane road to get to the local school or a park. So no go for our family. It sold soon after to another family.
My point wasn't that no one is dropping prices and the market is priced fairly. My point was that sellers who are unwilling to drop their price after 6 months in this market-- in essence, unwilling to SELL-- should take their homes off the market so they stop muddying the waters for everyone else.
As for homes being listed below what they "normally" would've been? There is no "normal." There is only market rate. Defined as-- what buyers are willing to pay. (My realtor even told me not to look at sales from 6 months earlier as comps since they were "irrelevant" in today's market. Truer words were never spoken.)
I'm not saying your frustrations are unfounded. I'm just saying to have a little empathy for buyers who aren't exactly comfortable plunging into a pool while the water's draining out of it.
Thanks for the wishes of good luck. I wish you the same. If I had a magic wand, I'd make this all go away for everyone's sake. Your house sounds terrific. Some day (hopefully soon) someone will be very lucky to start a life there.
When George Soros thinks "prices will fall" you can be damned sure that he is talking about a HUGE general trend that may or may not be reflected to any degree in any individual part of the broad Chicago market. HELL even if the numbers for the region fall, as all these over build condos get liquidated, I fully would expect certain single family homes will continue to hold value and maybe even increase. It happens.
What would you feel comfortable with? The range from $415 to $797 is just way way way too broad. Even if you could technically afford things at the upper reaches, are really happier stay under $500? That is a fine number, and A LOT of money, but you really are NOT going to do yourself any favors looking as stuff that is 50% ++ higher than that, unless you are willing to be in TOTALLY different kinds of houses, neighborhoods, communites...
There is NO mass erosion of value happening in ANY of the Chicago region.
The drops you reported have a AVERAGE of -5.12%
(the whole list: 7.57%,0.95%,6.61%,3.17%,3.43%,0.43%,1.78%,6.26%,4. 26%,4.86%,6.12%,15.8%,7.15%,4.11%,3.36%,3.5%,6.81% ,1.37%,6.72%,5.88%,4.17%,5.33%,3.92%,9.09%)
So only ONE crazy overpriced place was cut more than 10% -- as I said, it is just NOT smart to over price a place by 15%, and most agents will try very hard to talk any pie-in-the-sky types from putting their home on the market for that much over what is supportable.
Now if you want to ask me what the future holds for builders that were putting up huge tracts on home out in the sticks for $750-$1M places, well then I guess I'd be in the Mr. Soros corner -- that very likely to NEVER happen again...
Buying a house that you comfortable with starts by coming to grips with what you can COMFORTABLY afford. 5.118911
I'm looking in that range because we are considering two types of homes. 1. Houses that need new kitchens, windows, roofs, garages, etc. and 2. Homes that won't need us to touch much of anything for years.
As for ONLY a drop of 5% in a six month time frame? Are you serious? That's a pretty steep drop. And in all of my listing sheets, not a single price went UP.
We can afford beyond 750k. We are sane and have other priorities, so 750k is our upper end. For a perfect house. That needs no work in the foreseeable future. We visited the 850 home on a drive by without knowing the price. When we saw the listing sheet we half choked/half laughed. The 50k reduction (and still no sale) shows our reaction wasn't off base.
Since I prefer architecturally interesting old homes and don't like split levels or anonymous new construction, most of the homes we're considering are the older ones that need considerable work. It's in our budget. The home I toured was 599k and still needed some finishing (there were literally bare studs in places.) It also needed new siding, but was otherwise so nice, I was willing to consider it.
Anyway, I don't think we're going to agree on where the market is headed. That's fine. I've got my wallet and you've got yours. As long as we're not buying for each other, we'll both be happy.
Got to check out of the discussion for a bit, since I'm hosting two nephews for the weekend and need to go pick one up from school. I'll check back in when I can.
I understand that different kinds of houses are sometimes worth looking at, and sometimes it does make sense to sink A LOT of money into bringing up a run down place to make it match its neighbors, but that is a MUCH riskier proposition, especially if you have not done it before... You are also looking at radically more complicated borrowing, something that is not good at all in this mortgage challenged world. Please be careful that you don't end up with a mess on your hands, though it seems like you are brighter than most when it comes to understanding the potential financing pit-falls that are STILL out there, I'd hate for you to think that all prices are down. Most quality remodelers have not needed or been able to cut prices. Gas price increases alone are preventing that...
I don't see any reason why quality homes that have been bought by smart buyers who paid far in excess of $800K will not remain at/near that price in the Chicago market. There is SOLID activity in that price range, as it supported by the strong employment numbers that correspond to that segment of the workforce.
I've seen all kinds of corrections. When any market, whether it be stocks or corn or frozen concentrated orange juice, gets over priced their is are swift CHOPS to the overall prices, some stocks will really get punished (think Bear Stearns) while others seem to be resilient (think Apple or IBM). These corrections have been never a sign that things will forever slide lower and lower. Take a look at charts of corn or soy beans or lumber or copper or any commodity. The long term trend is NOT down -- everything that goes into building houses (and feeding/fuel the people that build them) is going to stay as expensive as it is today, mortgage rates are likely to climb higher, and I don't see any sudden drop in labor costs. All these things suggest that, over time, houses will continue to be pricey. Think about it this way: houses in your price range are not that different than a nice but not crazy expensive car. Maybe in the range of BMW or Cadillac (as opposed to something way up in the Bentley, Lamborghini range), certainly A LOT more than a Ford or Honda. While MAYBE some one-time price cuts will happen, there is NO way all that stuff is going to just spiral down to the point where you could pick up shiny new 5 series or CTS for what a Civic or Focus costs...
The majority of places did need SOME correction, in most (13 of 24) the listings you posted the drop was less than 5% which is hardly the kind of volatile market that the Soros of the world make their fortunes on! Heck, we might even say that, given the drop of the US dollar vs most other world currencies, that housing is STILL a safe place to 'invest'...
Listing prices pretty much NEVER need to be revised up, as in a tight market the bidding STARTS above the ask. Listing do sometimes get pulled, and re-listed higher -- generally after the seller does some fix-ups, but that is typically to address something that is hindering the sale, not because the market is so hot -- back when it was hot the agents would not raise the listing sheet price, they'd just flat out tell you "the seller has already received multiple offers above list"...
That won't happen anytime soon!
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