Market Conditions: The Super Bowl Is Over- Will Inventory Finally Pick Up In February?
Are you in a multiple offer situation on a property?
Nearly everyone who writes me tells me that they are (in both the city and the suburbs.) Properties are going under contract within 24 hours.
It also cuts both ways. They are getting multiple offers on their property they are listing to sell but they are up against multiple offers on properties that they are buying.
People are bidding over ask, in some cases, just to win the property. Some are even waiving inspection issues.
The Super Bowl is now over. February has historically been the start of the “spring buying season” in Chicago. But this year we’re starting it with record low inventory in most neighborhoods and record low mortgage rates.
What do you expect to see over the next 1 to 3 months?
Will more inventory come on the market as word gets out about the “hot” market and multiple offers? (I’m waiting for a Tribune article any day. What is wrong with them? Why haven’t they written it yet?)
Or will this low inventory market be the new reality in 2013?
It seems like such a fools errand to bid against fools others for some overpriced property in the hottest selling season in years.
HD: You’d think so- right?
I don’t understand the urgency to buy RIGHT NOW. I know plenty of people with leases who are looking. They could stay where they are until April, May, June. But they are desperate. They’re out there putting in bids on a house that gets 5 bids. And they’re complaining about what is available.
But when I tell them, “why don’t you wait 2 months?” they look at me like I’ve lost my mind and that there might not be any real estate for sale ever again.
I don’t get it. Inventory is at record lows. If you don’t need to be buying now, why would you? The spring selling season hasn’t even started yet.
I had a friend list their condo on Thursday and got a cash offer in hand on Saturday for 2% under ask.
a local: where? GZ or GZ-within-the-GZ?
“Sabrina – …I know plenty of people with leases who are looking….”
That is your reason – rents are outrageous. While there may be multiple bids on properties I don’t think many places are selling for crazy prices – we are still off a significant amount from bubble pricing. So while buyers aren’t getting great deals compared to 2011/12 they are still getting ok deals and their alternate cost (rent) has risen significantly from that time period.
rents have gone up. I heard my former landlord jacked up rent 20% for my unit after I left.
no way in hell i could rent a comparable place to mine for the same monthly outlay, we will remain put for probably another few years when we have another downpayment saved up for our next home, wherever that will be. Hopefully prices will at least remain stable during that time as it would be nice to have even a little equity when we are ready to move. Although with recent units for sale, i’m not counting on it.
I wouldn’t want to be looking now, if I ‘had’ to move… I casually browse our “move up range” occasionally on redfin and good grief! What a bunch of overpriced crap out there in not so great locations. Maybe cribchatter has made me a location/property snob *shrug*
“Sabrina – …I know plenty of people with leases who are looking….”
1) you never want to be in a position where you have to buy or sell a property by a specific date.
2) it takes a while to close so you should start your search well before said date so you have flexibility and leverage.
it sounds like the people you know are not taking advantage of their situation and instead imposing an artificial deadline and unnecessary pressure upon themselves.
“Maybe cribchatter has made me a location/property snob *shrug*”
Yes!
Have put out a couple offers over the last couple months. Most of my offers were under the winning bid by 50k+. It ‘s not like i posted outrageous offers either, some winning bids were 50k+ over the asking… I have one out right now, we’ll see how it goes.
“the “hot” market”
What does hot market mean? Do prices have to be going up? Do prices have to be going up at more than rate of inflation or historic rate of appreciation or more?
Or is hotness based on volume (relative to when? and controlling for what?) or existence of multiple offers (is that inconsistent with a “normal” non hot market)?
DZ, remember that not everyone is real estate savvy or into RE porn like the Chatarati. Case in point: the other day a friend said she thought she could sell her place for breakeven but cannot bring herself to do it because she paid “all that money for it.” I said “that’s because you’re thinking of it like Microsoft stock — you bought at $50/share and now it’s $25/share and you *just know* it can go back up to $50 a share”.
She completely agreed with my assessment of her thinking.
I don’t think there is a huge rush to buy real estate – remember that there is a back log of people wanting to buy (as these people have delayed buying for 4 years) – I know that people could argue that there is also back log of sellers – but sellers are holding off a little longer because they can (but I guarantee you that there will be a lot of inventory as soon as prices show sustainable and persistent growth over a few months.
If you aren’t underwater, have almost zero equity and youre renting out your place for more than your monthly nut, does it make sense to sell?
“If you aren’t underwater, have almost zero equity and youre renting out your place for more than your monthly nut, does it make sense to sell?”
Probably not.
How much would it cost to get a poll on:
1.) Those who have are willing and able to cut a check at closing have already done so.
2.) Who’s under water and can’t sell
3.) Who’s renting out their condo and not willing to sell
A poll like they do for elections etc.
Greenzone properties.
“If you aren’t underwater, have almost zero equity and youre renting out your place for more than your monthly nut, does it make sense to sell?”
Maybe Russ can chime in….If you are in the above situation AND you are looking to buy, especially if you are looking to upgrade your home, would you get approved for a higher loan amount if you don’t already have a property on your books? Does having two years of rental income on your taxes make a difference?
The property in question was GZ, walkable to resturants, small building/no amenties (though elevator), on a busy street.
“I had a friend list their condo on Thursday and got a cash offer in hand on Saturday for 2% under ask.”
I have another friend who runs a fund, buys foreclosures short sells, and has started flipping them (as opposed to renting them out) and is doing quite well.
Hot market: low number of months-of-supply. Divide the number of properties for sale and the number of sales. Less than 6 months is a seller’s market and more than 6 months is a buyers market. I don’t have the figures now but presumably it’s less than 6 months inventory, and it’s been more than 6 months inventory for so long now.
Sonies: ‘Hopefully prices will at least remain stable during that time as it would be nice to have even a little equity when we are ready to move.’.
That’s some highly flawed economic logic here. You should be hoping for the floor to fall out on prices if you are ‘moving up’ as you say you plan to. A drastic drop in home prices would be beneficial to you assuming that you are moving up in the same market. Having equity in your current home when you move is irrelevant.
Icarus, if you can’t sell the existing property you would have to qualify to carry both new mortgage and existing mortgage. You can only use the rental income that is reported on tax returns now. It used to be all you needed was a lease to show that the old unit was rented (if it was too early to have on tax returns). However, too many borrowers were doing “buy and bail” fraud so now you have to qualify with both properties unless you have at least 30% equity (per third party appraisal) AND putting down at least 20%. In that case, you can use a new lease to offset the existing mortgage. You get credit for 75% of the monthly rent. You also need 6 mos of PITI in reserves somewhere.
If the rent is on the tax returns, you can add back depreciation and they go off the net reported.
It would be better to rent for a high price for the next year or so than to overpay to purchase a semi-desirable property. A lease is a lot easier to get out of than an overpriced purchase. Also, we are clearly in a rent bubble. Rents WILL be going down once all these new apartment buildings are built.
“Maybe Russ can chime in….If you are in the above situation AND you are looking to buy, especially if you are looking to upgrade your home, would you get approved for a higher loan amount if you don’t already have a property on your books? Does having two years of rental income on your taxes make a difference?”
I’m always ‘looking to buy”… I’m already in my “long term” home. But yeah, having 2 yrs of rental income does make a difference. You’ll be able to count the income towards your income for qualifying for a new mortgage, different lenders have different rules but for the most part, 2yrs is the magic number.
“Less than 6 months is a seller’s market and more than 6 months is a buyers market.”
I thought I read something a week or two ago for all of Chicago proper and it’s 3-4months.
I hope prices stay stagnant. It was great having my property taxes go down.
I think more home owners will test the water this spring and potentially take their houses off the marketing when they realize prices haven’t increased THAT much.
“I hope prices stay stagnant. It was great having my property taxes go down.”
My thoughts are that prices will increase slightly in the short term, but by the time it hit’s the headlines, unemployment will decrease and the Fed will raise rates, beating down the prices to keep it in line with overall growth.
“It was great having my property taxes go down.”
indeed it was, mine have reduced now 3 straight years
“I hope prices stay stagnant. It was great having my property taxes go down.”
Not how it works in Illinois. The parts of the government funded by property tax submit their invoice, and the invoice gets divided by the aggregate (equalized) assessed value. So, even if your assessed value went down 50%, your taxes could go up a lot, if everyone else had their assessed value decrease by 75%.
In the close-in suburbs at the end of last year, I did not see much in the way of multiple bids. I have seen houses taking price cut after price cut and not selling or if it is a great property and priced well, it is snapped up in a week but slightly off asking price.
We were able to purchase our home well under asking price, although it took the sellers over two months to finally realize that a low offer was the only one they were going to get after having been on the market for over 6 months with only one price reduction.
Maybe the inner-ring suburbs are different than in the city….
I was going to say. When have Chicago property taxes ever gone down? Regardless of property values, government spending only increases, so taxes must also.
Stock has gone back to the level before crisis. Housing market is obviously lagged. Our dollars are worth less everyday and oversea investors are all crazy about the US real estates. Places like NYC and California are sold out. A safe bet is that you gotta catch this train when it leaves the station.
all sellers should sell by owner. its criminal the fees realtors charge. and for what? all the information is on the internet now anyway.
The outer suburbs will likely be dead zones or for the poor in the coming decades.
” When have Chicago property taxes ever gone down? Regardless of property values, government spending only increases, so taxes must also.”
Right Pete, jenny and I are totally lying about this subject…
“Also, we are clearly in a rent bubble. Rents WILL be going down once all these new apartment buildings are built.”
Maybe. From Marcus & Millichap:
Tenant demand will exceed completions this year, further tightening vacancy and cementing Chicago’s place among the Midwest’s leading apartment markets. Roughly 80 percent of new market-rate rentals slated to come online in 2013 are in the City of Chicago as developers add stock for an expected influx of new residents.
…
In 2013, vacancy will slip 20 basis points to 3.6 percent. During 2012, a 70-basis point decline was recorded.
“We were able to purchase our home well under asking price…”
Congratulations, Benjamon.
Didn’t realize you were looking to move to the burbs.
Weren’t you living around Bronzeville before?
Did you sell your place in the city or rent it out?
Still are at the moment Milkster. Will eventually be looking to rent. Sell? I wish…it’d cost more to unload the condo than it did to buy the house.
“Right Pete, jenny and I are totally lying about this subject…”
No, but Jenny plainly misunderstands how the taxes are determined. My AV for 2012 went down ~15%–if the aggregate AV is down 20%, my taxes *will* be higher.
C said “all sellers should sell by owner. its criminal the fees realtors charge. and for what? all the information is on the internet now anyway.”
Fwiw I’m in real estate (not a broker) but I’ve learned thru bad experiences trying to do FSBO that using MLS is critical to reaching the greatest amount of most likely prospective buyers of residential property (except in a very, very few submarkets where word of mouth & advertising may work). While realtors/ brokers do control the tollgate to MLS, there are more lower cost options available to list a property on MLS than ever before. And the situations previously described in this thread where properties sold for more than the asking price most likely were on MLS, which would offset some of the cost of commission.
“C said “all sellers should sell by owner. ”
“using MLS is critical to reaching the greatest amount of most likely prospective buyers of residential property ”
To me selling FSBO would include putting a listing on the MLS through a flat fee broker. What exactly does a listing broker do that an owner couldn’t do? A buyer broker at least needs to spend the time to drive prospects around.
And yes, I do get there are a lot of things that a listing broker can help with, especially for most people who are not ” in to” real estate. But the system is antiquated.
Benjamon, if it makes you feel better rents are up in Bronzeville too.
I know of a situation where someone was renting their place for $1,600 a couple of years ago and now they are asking $2,500.
I can put you in touch with the agent if you like.
Sabrina knows how to get ahold of me if you need help.
LTB, I’d say a good listing agent would counsel the seller on comps, preparing the property for sale, leading the negotiations, etc. While anyone can sell/buy unrepresented, it is a huge time sink. Who wants to interrupt their work day to run home and show their place? I had to do this several times when I sold my condo FSBO. Huge PITA.
Just because you can do something yourself, doesn’t mean it is worth it in the long run. A lot of people are completely irrational about their places (just see many of the places we discuss on here). In my experience working on the finance side, many of the deals where either the buyer is not represented or the seller isn’t winds up being somewhat of a fustercluck. Procedurally, often times people just don’t know what they don’t know.
Agents do make a lot on a per transaction basis, but it is driven by the compensation being contingent more than anything imho. Sellers could probably save money by hiring an agent who may charge by the hour, etc but sellers prefer to only pay when a sale occurs. The compensation reflects the risk of NOT being compensated. So the question is would you rather pay say $2500 regardless or $10k (or whatever it happens to be) only if the place sells?
The RE industry does itself no favors though with the low barriers to entry which I think is what drives much of the perception. More bad ones than good ones.
“To me selling FSBO would include putting a listing on the MLS through a flat fee broker.”
I did this selling my place. Paid about $500 for the broker to put on MLS. It’s required by law that they have to perform some minimal service which includes negotiating on your behalf. If you have the time and flexibility to show your place it’s a great way to save some money.
Milkster (February 4, 2013, 3:30 pm)
Benjamon, if it makes you feel better rents are up in Bronzeville too.
I know of a situation where someone was renting their place for $1,600 a couple of years ago and now they are asking $2,500.
This is PROOF we are in an unsustainable rental bubble. Otherwise, nothing in Bronzeville would ever be able to get River North rents.
In the Great Housing Bubble, developers were able to get premium prices for condos in sub-optimal neighborhoods. Now we are seeing this happening with rents due to a shortage of supply. Once the supply catches up with demand (in another year or 2 at most) the outlying areas will see drastic rent declines. Prime areas less so.
“Milkster (February 4, 2013, 3:30 pm)
Benjamon, if it makes you feel better rents are up in Bronzeville too.
I know of a situation where someone was renting their place for $1,600 a couple of years ago and now they are asking $2,500.
This is PROOF we are in an unsustainable rental bubble. Otherwise, nothing in Bronzeville would ever be able to get River North rents.”
Milkster, I’m not sure we want to use an agent but any help would be useful. Let’s find a way to get in touch.
Pete, you can’t compare X place in Bronzeville to Y place in River North. A place in RN that is renting for the same price in Bronzeville is going to be a 1 bedroom with no parking whereas the unit in Bronzeville is going to be a 3 bedroom/2-3 bath with at least one secured parking space and free and ample parking on the street. They really aren’t comparable and people looking in RN are not the same people that are looking in Bronzeville. That is like saying a place in Chicago will never cost as much as in New York. You can find plenty of mansions in Chicago that cost as much as 1 bedrooms in New York but they aren’t comparable and no one is going to be cross-shopping them.
Benjamon, I’m confused. Are you looking to rent an apartment now? Did you just buy a house, sell a house, still own a condo?
Also that Ridgeland home in OP that you pointed out finally dropped to a more realistic price though it sill needs to go south of $400K to get a buyer IMHO
Icarus, the Ridgeland home has been steadily dropping. It has some great features/space but certainly has its drawbacks.
We’ve bought a house, still own our condo and will be renting it in the future.
I think the Ridgeland house is a great example of the homes I am seeing with cut after cut and no sale in some of the burbs.
@Benjamon got a Redfin email about the Ridgeland house today “Price: Changed from $429,440 to $429,340”
Stupid seller/realtor tricks aren’t gonna do it at this point. If they had dropped to $425 in the summer when $450K wasn’t doing it, they might have a buyer by now. Now it’s sitting on the market stale.
My experience::: My husband and I have been looking for a house since mid-Jan in NW Chicago, and the N/NW suburbs. We put an offer on a house in Arlington Heights that had sat on the market for 90+ days only to find ourselves in a multiple bid situation. We were outbid – my understanding is they went over list price. Currently, we are under contract on a foreclosed property in NW Chicago, for 11% over list price. We put in an offer within 2 days of listing. I think we got lucky, as we saw/offered the same day as the big snowstorm. The listing office informed us that its phone had been ringing off the hook from prospective buyers wanting to see the property that weekend. My experience of the market currently is that, if it;s not a complete turd and is well priced, it will go fast.