Market update provided by Mario Greco of the Mario Greco Group, Rubloff Residential Properties, in Chicago, Illinois.
Itâ€™s no surprise that the last four tumultuous weeks on Wall Street have changed the entire landscape of the residential real estate market. Unfortunately, the hysteria surrounding the plummeting stock market has spread to and infected the Chicago housing market.
Simply put, itâ€™s been a whole new (mental) ball game since Sept. 15.
I think itâ€™s important for home sellers to understand how the turmoil on Wall Street has affected the Chicago real estate market. In a word, the uncertainty has caused a paralysis in our local market. The traditional three â€“ or, depending on how you look at it, four â€“ groups of buyers still exist today, as they always have.
The first group is made up of those home buyers who have the cash or credit to buy, but are scared to make a move. The members of this group are sitting on their hands, much like the banks are. The second group is made up of buyers who were on the fence either in desire or ability and are not buying now. They, instead, are waiting to see what happens before they make any move. The third group includes those buyers who couldn’t or didn’t want to buy. Well, they’re still on the sidelines, either by force or by choice. Even the fourth group, the vultures, can’t buy because banks aren’t lending money for most deals, let alone those that are risky.
As a result, deals are slow to materialize and those that already have been struck are being renegotiated orÂ killed over minor details.
I don’t know what this week or the next few months hold for the psyche of the Chicago homebuyer. But what I do know is that until the fear and resultant paralysis mitigates â€“ either thanks to real positive data or buyers realizing that if they can get a mortgage they shouldn’t think twice about buying because this is the best buyer’s market many have seen or will ever see â€“ home sellers need to weigh their options and be careful to navigate this storm in the way that best suits their individual needs.
So… The options as I see them are as follows:
1. If you do not need to sell and can wait three to six months, you should think seriously about taking your property off the market and re-listing it when the psyche of the buyers has improved. Again, it’s not that the factors aren’t there for people who can buy to purchase, but most of them are scared and don’t want to jump into choppy waters. Only those who have to buy are buying at this point, and I don’t see that changing until spring of 2009. The pros of this approach are that you will save market time, resetting it completely if you take your home off the MLS for 91 days; return to living a normal (non-showing-ready) life; and not have to leave the house when it’s cold/snowy (it’s coming), etc.
The cons include the fact that you will probably be getting back into the market when it will have more competing inventory, you may have to sell for a lower price if the market continues to deteriorate. Also, you wonâ€™t be able to move into that new place you’ve been thinking about for the past several months now.
2. If you really want to or have to sell in the next 90 days, you must make sure that your list price is at or just below the ACTIVE COMPETITION. You then must be ready to sell for a price at or just below the most recent COMPARABLE CLOSED SALE. “Hope” and “want” (as in “I was ‘hoping’ for this price/return” or “I want X price”) do not apply to this market in light of the global financial mess that has tainted even a stable Chicago real estate market.Â Sellers, with the help of their REALTORSÂ®, need to come up with a price at which they can AFFORD to sell (not want to sell), and then price their homes accordingly.
The pros of this approach are that the chances of a sale are dramatically increased because property is still selling when priced well, sometimes with multiple offers for close to list price even in this market. Also, you get to move onto the next chapter of your life and take advantage of this mess on the buy side by extracting a much better deal on what you’re buying (usually more expensive so it theoretically makes up for the “loss” you might take on the sale of your present place.) You can also avoid foreclosure.Â
The cons include a sale price that is lower than anticipated, hoped for or necessary to pay off your mortgage, thereby necessitating a short sale.
3. If you are in the above category of “have to/really want to sell,” another real option is renting your present place out for six to 12 months. The pros of this is that you will stop the bleeding (if your home is vacant) and re-enter a possibly better marketThe cons are that this move will cost about a half month’s rent (rule of thumb) to get your place back into showing shape when its lease is up. Also, showing a leased place can be difficult as tenants tend to begin to feel like they own a place by the time their lease is up. Finally, you will more likely than not re-enter a more saturated market because you will not be the only one going this route.
In sum, this is a very turbulent time in the financial markets – of which real estate is one. Your REALTORÂ® needs to make sure that he or she presents as many ideas and possibilities to meet all of your specific needs. If REALTORSÂ® and their clients work together, we’ll all get through these troubling times relatively unscathed.