Market Conditions: Chicago 3Q Sales Fall 23.3%
It should come as no surprise that Chicago third-quarter home sales continued to slide (as each of the monthly reports during the quarter showed slowing sales).
From Crain’s:
In the city of Chicago, third quarter-sales were down 23.3 percent, to 5,958 units, from 7,769 in last year’s third quarter. The median price of a city home was down 4.5 percent, to $289,400, in the third quarter, compared to $302,900 in the third quarter of 2007. The median is the midpoint, at which half of the homes sold for a higher price, and half for a lower price.
“Clearly the housing market is still unsettled,” said David Hanna, president of the Chicago Association of Realtors, in a news release announcing the sales figures.
Chicago-area home sales slide 22% in Q3 [Crain’s Chicago Business, Nov 17, 2008]
Meh…for all of us doom and gloomers this decline really isn’t that bad. I think sales volume for the period 2003-2007 was inflated so I’d bet these are comparable to volumes before then.
Bubble era sales volumes (along with pricing obviously) were completely unsustainable.
this decline is on top of 2007 decline, can’t believe its already been an year since credit spigot turned off….
Bob, this news is simply repetition of old news. But the real nugget is the less than 6,000 sales in Q3 figure. As of 12 minutes ago Zip Realty said that there were “99,532 homes for sale in Chicago, IL”. There’s a lot of inventory to work through. And by a lot I mean we’re swimming in inventory. Most if not all of it unaffordable without toxic financing.
Can someone make a comment about the Edgewater neighborhood? I live in this area and have noticed over the last few months that there are fewer and fewer sales signs in the yards. With the exceptions of a couple big developments on Broadway, what is going on?
“fewer and fewer sales signs in [Edgewater}”
Two things I can think of, which may or may not be right: (1) people are deciding to sit tight and/or rent out their places in hopes that the market improves and (2) lotsa foreclosures, leading to properties coming off the market at least temporarially.
Jason, I notice a reduced number of units listed for sale in Edgewater on the multilist.
But I think there is a lot of stuff that is there, that is not being listed there, that could be referred to as “inventory overhang”. For example, there are vast numbers of new and newly converted condos around here sitting empty and unsold, yet you don’t see them on the multilist; and Rogers Park is stuffed with unsold units in new and newly rehabbed buildings, that are going to foreclosure by the dozens.
That makes sense. I live in a vintage conversion building that has 26 units, 5 of which have been on the market since 2006. The developer has still not sold them….
UGH! Volume drying up like this can only mean that we aren’t even close to a bottom. This is terrible and stubborn sellers are only making things worse.
Sellers: if you need to sell, cut the effin price already (or just don’t bother listing). Prices will NOT be going up any time soon, you are very unlikely to find the magical buyer who cons copious amounts of funny money from a bank (banks are finally being fiscally responsible), and you are already priced 20% higher than where the market is!
The problem is that many buyers cannot afford to lower the price. The only way to sell is to short sale. And you can’t really short sale if you have assets and have been paying your mortgage ontime. These people are zombies. Millions of them out there. They’re the people who are pulling the band-aid off slowly so to speak. They’re solvent but too far underwater to sell. That’s why this recovery will take years. The upside however is that if people are stuck in their home they actually may make it a home instead of the live for 3 years then flip mentality. They might start caring about the local schools, the local businesses and the neighborhoods in general. Especially those in the fringes who bought they don’t really have a choice b/c they’re stuck, like Logan and Rogers.
HD –
I have to agree with you on your last comment. I admit that at one point I had visions of buying and selling within three years. That is obviously not going to happen now, because I am completely upside down right now on the mortgage. What pisses me off is that I pay my mortgage every month and hear stories about assholes who sacrifice their credit in order to unload their house because they made the same mistake as I did. Where is the relief for me, the responsible owner who will stay in their home and pay their mortgage because that is what I signed up to do?
But back to your point, I have noticed that I am starting to pay attention to our neighborhood and get involved with its future direction…
The relief is that you have good credit, a stable home and a responsible attitude. If you go into foreclosure because you’re upside down then expect it to follow you for at least 11-12 years from your first missed payment. And unless FICO changes its scoring algorhytm, a foreclosure will ding your credit tremendously. Bear in mind that people reap what they sow in life. Those that game the system never win even if they think they do. It all catches up with them and for the most part it does.
“Where is the relief for me, the responsible owner who will stay in their home and pay their mortgage because that is what I signed up to do?”
homedelete – As always, great comments. There are a lot of people out there pitching the idea of an easy fix for people to get out of their mortgages. Heck, there are even companies in S. Cali doing this big time. The problem is a lot of people that got into too much house or a house they never could afford under any circumstances are the same ones that are getting involved with this….some people go from scam to scam…there is no hope for these people and no teaching them, they have to learn it the hard hard hard way and bailouts will only enable and embolden them. Maybe in a tougher job market employers will review credit histories to judge candidates and give the good jobs to the responsible people in our society….lord knows the responsible, law abiding, hard working, family supporting, taxpaying people need a pat on the back and big thank you since they are what makes this country great. Wouldn’t it be nice to see a politician come out and thank the responsible people and encourage them instead of all the pandering for more handouts to people who, for the most part, created their own poor circumstances?
Just got this email from ELOAN:
“There’s plenty of perks for taxpayers, savers in final rescue plan
E-LOAN
So, we’ve heard about this big financial rescue plan and what it will do for companies suffering in the financial sector. What does this mean to consumers nationwide? Turns out there are many perks for consumers in the bill. Read more about how consumers may benefit from this in more ways than one.”
Lordy lordy, here we go again….
John and homedelete…
But what about Hope and Change? I thought that would pay off everybody’s mortgage…
Now now Homedelete. You’re just as guilty of idealism as the RE bulls with that blanket statement. Lets be honest: a lot who gamed the system did win. Think about all of those who fled back to eastern europe, etc. There are always outliers–there are those who sold at the peak and then rented, too. I suspect you’re guilty of pretending reality is truly as you wish it were. C’mon idealism from a lawyer? You of all people should know better.
“Those that game the system never win even if they think they do.”
kp – it is Hope(less) and (short)Changed.
It’s not idealism it truly is reaping what you sow. If you act like a financial idiot you’re going to have financial problems. If you go around acting all promiscuous you’re gonna catch the clap. If you drink and drive you’re eventually going to get caught or get in an accident. If you are a senator and you try to pick up men in the bathroom at airports you’ll eventually get busted in a sting. If you refrain from doing these things you have a ZERO perent chance of getting caught. The list goes on and on. That’s all I meant by reaping what you sow.
“I suspect you’re guilty of pretending reality is truly as you wish it were. C’mon idealism from a lawyer? You of all people should know better.”
I lowered my rehab $80k already to avoid all the overprice BS. I know the place isn’t worth it anymore, and I need to move on.
5% realtor Co-Op, and possibly 2 years paid assessments and a home warranty to boot.
At this point I’d rather someone have a nice home at a good price rather than make any profit. I get out of it, and they get a good place at a good price.
I’m hoping my “reality” will help this property find a new owner. I’m a realist, and I just want the property off my books.
What amazes me is how stubborn and greedy some sellers are. We put in an offer on a place in LP – first offer was turned down because it was “ridiculous” (75% of asking, okay a bit aggressive), next offer (80%) same response, then we went up to 85% and the guy finally countered – with 99%. He said he was considering taking the place off the market after 4 months and no other offers aside from ours “so that he could get a better price in the spring”. Even his own realtor thinks he is nuts. We told him to get lost.
If your place isn’t selling YOUR PRICE IS TOO HIGH. Also, why not negotiate on ANY offer? In today’s market you should take up any opportunity to negotiate with buyers.
“…for all of us doom and gloomers this decline really isn’t that bad. I think sales volume for the period 2003-2007 was inflated so I’d bet these are comparable to volumes before then.”
That’s the whole point. Getting back to normalcy. But where is the bottom and what yer does that revert to. Is it 2002, ’01, ’00….? We have more to go IMHO. If the sales volume goes back to 2001 levels with all the inventory that has been added since then more price declines are to come.
GOOD LUCK THETURTLE!
Thx Jason, place is nicer than the one I live in. I hope someone takes it off my hands soon, as its the lowest priced property in it’s “area” by a longshot 😉
Sorry I’ve missed this discussion until now. Looks like a good one.
The whole seller resistance thing amazes me. I think we’re in the realm of behavioral economics. People are not rational. I know for a fact that people would rather lose $30,000 in holding costs over the course of a year than cut their price $30,000. Somehow, refusing to cut their price gives them back the control they’ve lost.
Turtle, what the hell with the 5% co-op? Did your realtor tell you to do this? First, the buyer’s agent is not even going to notice that unless the place meets the buyer’s specs to begin with. Second, the buyer’s agent would have to be a real scum bag to push your place on their buyer over other places. OK, that’s a real possibility but I think most buyer’s are going to push back on a pushy realtor that is clearly not working in their best interests.
Gary:
What about the investors who continue to close on investment condos because they don’t want to lose their deposits- when they can’t cover the costs of owning it by renting it out and there is little chance that they’re going to sell it for anything but a loss (even in the next few years)?
So- they close on it and instead bleed money month after month and will do so for years.
It makes no sense- except they must believe that somehow the real estate market will recover “next spring” or “in two or three years” and that they’ll sell for more than they paid.
I’m still seeing this rationale all over the downtown.
Annoyed Buyer — Wow, I can’t believe that. Some people just don’t get it.
Sabrina, yes it’s the same thing. There’s actually a lot of academic research going on in this area called behavioral economics. Basically, people don’t act rationally. Most of the research has been done on people’s approach to stock market investments but it applies to houses as well. There is an irrational belief that the market will turn and there is also a belief that as long as you don’t sell you haven’t really lost anything. There is also this compartmentalization of investments – if you lose on a particular investment then you feel like you have to make it back on that exact investment even if better investment opportunities exist on which to recover.
There’s another phenomenon at play here as well I think. People often choose an alternative that is not in their best interest in order that someone else not get a better deal than them. (I’m tempted to comment on voting patterns here) So I think sellers don’t want buyers getting a good deal and therefore take an even worse deal for themselves – continue to bleed.
The irrational behavior of sellers is no surprise since, in most cases, it is entirely consistent with their previous irrational behavior as buyers.
It is just another confirmation that the bubble was the problem and the inevitable correction is the solution.
The correction will be massive and we will all be better off from it in the long run.
Just think, when homes are seen as expenses once again we can get back to investing our money in productive ways.
Sabrina I think the irrational closing was where we were heading with Jason R.question a few days back, unfortunately he never clarified. I loved how Streeterville realtor just wanted to get him to closing though…
Gary.. People act funny when the two major driving motivators are fear and greed. Fear is worse.
Reap what you sow Homedelete? You mean like that judge in Beverly who was swerving around in her trunk drunk flashing her headlights and hit a minivan with a family of five in it, was re-elected with 77% of the vote and only got her license suspended for six months (no jailtime)?
Lots of financial idiots made out ahead during the boom, too. Lots of people had no idea how much risk they were undertaking but managed to eke out a gain during the boom, its all random luck really mixed in with some sense. Enough of the karmic proselytizing now please.
“If you drink and drive you’re eventually going to get caught or get in an accident”
yup, 5%, and the agents are noticing, but it was more of a bonus for an agent who has an interested party already. I am very motivated, so why not motivate others.
Of course I don’t want agents pushing the wrong unit on their buyer, but that hasn’t been happening, so no worry on this one.
Gary: you are right on. all the reasons you gave are basic human emotions that traders have to fight in order to survive and profit in the markets. (It boils down to fear and greed as Ze says). e.g. fear of giving a better deal to someone else by selling low.
I have a feeling that when these fear/greed-driven investor-sellers capitulate that we will be near our bottom. Until then, I’m not jumping into the housing market.
I just hate the fact that these people might/will be bailed out for their terrible decisions.
Also this behavioral aspect to it is one reason really driving me to foreclosures when its time to buy. Hopefully with foreclosures the emotions are removed as you are dealing with the bank and they will treat it as a strictly business decision.
In fact I wonder if people would be more willing to sell at a discount if they thought it was a corporate buyer like a company or something that was getting the better deal. I’d bet they would.
Turtle, I think you’re throwing away 2%. As you pointed out the agents who are noticing already have interested buyers. The only way that extra 2% would make a difference was a) if the buyer wasn’t all that interested and b) the agent was a scumbag (which isn’t your problem, BTW) and c) they decided to push the unit on their buyer and d) their buyer didn’t get pissed off for them for acting like a salesman instead of an agent.
I’ll gladly take a 5% co-op (I rebate part of it anyway) but it would never make a difference to me.
Turtle.. Throwing away. In this market any broker with a fish on the hook will be very happy to get a client into something they may want and be able to buy w/o the extra percent. Save the 2% to give back to the buyer in negotiation.
I personally know people who sell and transact in REOs and the only emotion you’re going to get from dealing with the bank is frustration. Getting an answer from the bank about credits, taxes, price reduction, etc, is a pain in the butt.
In Chicago there are some deals to be had (the comp killers) but they generally get snapped up pretty fast b/c they are priced $50k below the last comp. The rest of the inventory is junk the banks can barely give away in neighborhoods that are full of toxic waste and convicted felons on parole.
We’re still early in this depression and more deals may be had in the future as the economy sinks further and the alt-a explosion takes hold. No one will be buying properties in desirable areas for pennies or even dimes on the dollar. As shown from this site, there is a fair amount of pent up demand from buyers looking for ‘affordable’ properties in desirable areas and the number of buyers will probably always outnumber the supply.
That’s not to say that desirable areas won’t become more affordable over time, because they will, and downward trending comps speak for themselves. But many sellers are delusional right now and it’s going to take years for them to realize that a 2 bedroom condo on the north side with no parking is not worth $350-$400k to anybody who could afford those payment according to traditional lending standards.
For example, a few months ago an REO attorney showed me the list for a foreclosed townhome in my neighborhood that sold for $400k a few years ago, and the bank recently sold as an REO for $310k (or something close IIRC) shortly after it was listed. Just the other day I saw a listing from a delusional seller for an identical townhome in the same development listed for $389,000. Every townhome in the subdivision lost $90k in paper value because of the REO.
“#Bob on November 19th, 2008 at 10:52 am
Also this behavioral aspect to it is one reason really driving me to foreclosures when its time to buy. Hopefully with foreclosures the emotions are removed as you are dealing with the bank and they will treat it as a strictly business decision.”
I mean these are trained diplomats… these people had to hug guys like Arafat. What a statement!! Someone was just told ”Don’t let the door hit you in the ass on the way out in about 15 languages”
http://www.youtube.com/watch?v=k6Y_ncOVlDw
alright, i’ll check into it. Seeing my agent is my wife, of course I’m on board here. But I agree, keep the 2% and use it for negotiations. We have a really interested buyer, just waiting for that phone call or fax, as always, ugh.
Fire your agent.
“John on November 18th, 2008 at 12:58 pm
homedelete – As always, great comments.
”
Hey John – Do you live in HD’s studio with him? “As always, great comments”? What are you his wife?
So today looks like nice weather in Chicago for looking for houses. Things always show so much better when all the trees have no leaves also.
Should set up for a nasty spring.
By the way anyone see the commercial real estate article in the tribune yesterday. Lookin good there too!!
Over-supply and demand destruction. Just like housing.