In its October issue, on newsstands tomorrow, Chicago presents its annual real-estate charts, which look at home prices in nearly 300 neighborhoods and towns. To no one’s surprise, prices remain down—way down—but other data on the charts also point to weaknesses in the local market.
Consider the time a home remained on the market before it sold. In about 60 percent of the suburbs and 36 percent of the city neighborhoods on the charts, the average amount of time a home spent on the market this year was at least twice the amount of time it took to sell a home in the same location in 2006, the boom-years’ peak for the local real-estate market. In another 40 percent of city neighborhoods, a home took at least one and a half times as long to sell as it did in 2006. Only 2 percent of suburbs and 7 percent of city neighborhoods are selling faster than they were in 2006.
The extended time needed to sell a home makes a difference. Job seekers must wait longer to find out if they can move to another job market. Parents have the same delay on school districts, and everyone living in the home can get frustrated with having to keep the place open-house tidy. And slow-selling homes add to the persistent consumer pessimism that the Federal Reserve chairman, Ben Bernanke, bemoaned last week.
Who’s keeping homes from selling faster? Both sellers and buyers, says Patsy Bonniwell, a Better Homes & Gardens Gloor agent in Oak Park (where, incidentally, it takes exactly twice as long to sell now as it did in 2006—140 days compared to 70 days). Many sellers, Bonniwell says, are understandably reluctant to set their asking prices as low as the prevailing market conditions suggest. Largely because they can’t stand to see the money they spent on the house disappear into thin air, they still want to try a higher, mid-2000s asking price. (In The New New Rules of Real Estate, also in the October issue, I argue that this is a no-no.) “But they end up having to do a few price reductions before it sells,” Bonniwell says, “and by then, it’s been on the market awhile.”
Bonniwell believes that buyers are slowing things down too. “Getting a mortgage is so much more difficult that it means there aren’t as many people out there ready to buy,” she says, and among those who can buy, “a lot are gun-shy about pulling the trigger because they think prices are going to go down more.”
This may explain why some of the biggest slowdowns are in middle-class suburbs. In Elk Grove Village, Warrenville, Brookfield, Palos Hills, and a dozen other suburbs, our data show that it now takes more than three times as long to sell a home as it did in 2006. These are places where sellers may be less able to afford a big-dollar loss than homeowners in high-income areas—many of whom might see that loss as just one financial setback within a larger portfolio of investments. In seven of the eight neighborhoods or towns with an average sale price over $1 million, though the time it takes to sell a house has lengthened dramatically in the past five years, it’s below or in the middle of the range. Only Kenilworth is different: it takes almost three times as long to sell there now as it used to.
So what’s the best way to get a house sold in less than the going length of time? “Really nail the price,” Bonniwell advises. “Get it right in the beginning.”