In the past month, signs of vitality in the Chicago real-estate market have proliferated:
• At the end of July, Chicago posted the best price increase—4.4. percent—among the 20 top U.S. cities covered by the highly regarded Case-Shiller index. By one writer’s measure, it was the largest increase the city has notched since 1988. We’ll see if that holds next Tuesday (August 28), when the latest round of Case-Shiller data is due.
• In early August, the Regional Economics Applications Laboratory at the University of Illinois said in its 3rd Quarter 2012 forecast that prices in both Chicago and Illinois should remain about the same as they were in the same period a year ago. That’s good news after the successive declines of the past few years. The forecast also said that the number of homes sold should be significantly higher than in the third quarter of 2011.
• Last week, Appraisal Research Counselors delivered its 2nd Quarter 2012 report on downtown residential neighborhoods. Among the findings: For a representative sample of 65 downtown condo buildings, the average sale price per square foot was essentially the same in the first half of 2012 as it was in 2011. “It now appears that pricing may be stabilizing,” the report said.
• The same report noted that the inventory of unsold downtown condos, which peaked at 8,222 in the first quarter of 2008, is now down to 1,229, lower than it’s ever been in the 15 years Appraisal Research has been counting.
• Also last week, Re/Max reported that across the seven-county metro area, the average time a home took to sell was shorter in July than it had been in nearly five years.
• Yesterday, the suburban Main Street Organization of Realtors reported that sales of single-family homes in July were up 27 percent from July 2011. Towns where the number of sales was more than twice what it had been a year before included Brookfield, Homewood, Inverness, Mount Prospect, and Wauconda.
This is all looking good enough to convince skeptics and foot-draggers that the Chicago area may finally be turning the corner toward a “a normal [real-estate] market, where things aren’t going gangbusters but they’re slow and steady,” says Linda Levin, senior vice president at Jameson | Sotheby’s International.
Levin and Appraisal Research’s Gail Lissner both say that the pace of sales impresses them most. Both attribute it to realistic pricing by sellers—whether they are individual homeowners or commercial sellers, such as developers or banks that have taken over projects.
“It’s a great time to be a buyer,” Lissner says. That’s not only because prices are low, but also because they finally appear unlikely to dip much lower. Though buyers may no longer get those rock-bottom prices—that opportunity may have passed, though we can’t be certain yet—they will get a price that, while slightly above the bottom, is at least not headed downward (fingers crossed!).
Sellers, Lissner says, have gotten the message that “it’s all about price. If they want to sell out, they adjust the pricing.” She mentions 200 North Dearborn, where a year ago prices were cut by as much as 50 percent, and a flurry of sales resulted. “They’ve been the volume leader,” Lissner says.
Levin says that the perception of stability has brought out what she calls “better buyers. They’re not the bottom-feeders who are looking for a [steal]. They’re educated, and they see that it’s time to buy confidently.”
On the other hand, Levin warns against over-confidence among sellers. “They see the market is picking up, and they tend to react prematurely,” she says. “They can stop the market with high asking prices. [Selling] prices haven’t increased.” (The price increase seen in Case-Shiller reflects the uptick from recent months of super-lows; prices are still down from a year ago.)
Almost a third of sellers in 20 cities, including Chicago, who were recently surveyed by Redfin said that they plan to price their homes higher than the amounts garnered by comparable nearby sales. Kudos to the two-thirds who didn’t say that.