The Housing Bubble

The Chicago Tribune announces, ‘It’s a buyer’s market.’ “It’s been a long time, at least five years, since the Chicago area’s real estate market worked this way. Homes sell in months, not hours. Prospective buyers actually browse. They drift back for a second look at a place weeks later, confident that it still will be available. They want the price cut. And they get it.”

“That means it’s time for a seller attitude adjustment, real estate agents say. Think about making a mere profit rather than a killing. ‘I tell sellers, this is not the market we used to have,’ said Gold Coast agent Jeri Dry. ‘I tell them to be prepared for a six- to nine-month marketing time, and that’s if they’re priced correctly. It could be a year,’ Dry said. ‘Lots of condos have been on the market for 300 days.’”

“What has changed in terms of verifiable statistics is that the inventory of homes on the market has surged, even for the traditional spring selling season. Faced with so much competition, many sellers are being counseled to settle in for a longer wait, and think hard about their asking prices.”

“‘You tell them, `Tighten your belt as tight as you can get it,’ said Deerfield real estate agent Honore Frumentino. She said that North Shore homes in the $2million to $4 million range, which already had been selling slowly in 2005, are getting even less attention now. ‘We had a three-year supply of those homes last year, now it’s up to five,’ she said.”

“In the first four months of 2006 the Chicago-area market took on about 97,000 new listings of single-family homes and condos, up from 83,000 new listings in the year-earlier period, according to the Multiple Listing Service of Northern Illinois.”

“A leading concern is that while the number of homes on the market is higher, the pace of sales has not changed. That translates into an advantage for buyers. ‘I’m worried about selling,’ said (appraiser) Chip Wagner, whose home in Naperville went on the market about two weeks ago. ‘There are 30 percent more listings this year than there were at the same time last year, and 20 percent fewer homes under contract,’ Wagner said.”

“‘This is a year when I’ve had more low-ball offers, people coming in $60,000 to $80,000 below asking prices,’ said Oak Park agent Donna Karpavicius, who recently took over another agent’s languishing ‘needs work’ listing of a home in Riverside. She immediately got the price reduced to $429,900 from $489,500 but has received little response, other than a couple of too-low offers around $350,000.”

“‘There’s a type of seller who expects they’ll be able to finance their 2-year-old daughter’s Yale education on the sale of their two-bedroom, two-bath,’ said North Side agent Lino Darchun. ‘They don’t understand the concept of ‘comps.’”

“Mike Malloy took a long, hard look at the ‘comps’ last weekend when he met with Downers Grove agent Veneris. ‘If this were last year at this time, I’d be telling him to go $10,000 higher,’ said Veneris. Malloy said he is philosophical about the $10,000 difference that a year can make. He’s not greedy, he said.”

“He paid $199,000 in the heat of the boom; the home had been on the market just one day when he bought it in 2003. He figures he’ll do well if it sells anywhere near his $274,000 asking price. ‘I’ve only been here three years, so either way, that’s a lot of money,’ he said.”

“Some industry analysts see other factors at play. Analysts say that some buyers have gotten skittish, they’ve heard the word ‘bubble’ so many times that they are holding back, waiting to see what happens. At some point enough people start to think things are slowing down that they behave differently, creating the self-fulfilling prophecy of a slower market.”