The real estate market has had more than its share of bad news lately. Home prices are down, foreclosures are up and the outlook for the future is more of the same. From a big picture view the real estate market is miserable. But I’m seeing some signs here in the Chicago area that we may not have turned the corner, but we may be a lot closer than most people think. This isn’t a scientific account of what is going on, it is simply an anecdotal look at what I’m seeing in the market right now. I’m not sure what exactly is causing this, maybe it’s a result of the new housing bill, or maybe it’s just the realization from home buyers that there are bargains to be had, but the real estate market here in the Chicago area is active. Here are some “trends” I have noticed:

1. Properties are selling – August is normally one of the slowest months for selling real estate here in the Chicago area. This is the month when people are taking their last minute vacations, getting their kids ready for the new school year, or just enjoying the end of the summer. Most years home buyers take the month of August off. It’s no fun spending the day climbing in and out of a Realtor’s car when the weather is so hot. But that’s not the case this year. Buyers are writing contracts, and a lot of these contracts are coming together. I know because my phone is ringing and I’m busy putting together loan packages at a time when I expected to be able to put my feet up on the desk and take it a little slower.
2. Realtors and home sellers are pricing homes to sell – Any time that the market changes, it takes people a while to recognize it. This is especially true for the real estate market where the changes happen slower and are invisible for all but the most attentive consumers. The market a few years back was white hot. Most home owners didn’t buy a home during that time, but they saw the high prices homes in their neighborhoods fetched, or maybe refinanced their mortgage with a value higher than they expected. It is those prices they have in mind when they go to sell. Or it has been until lately. Realtors are now pushing harder for realistic (lower) listing prices, and home owner’s who want to sell rather than just have a sign in the yard for the next 6 months, are listening to them. So listing prices have come down by a lot.
3. Home buyers are getting realistic, too – There is no question that this is a buyer’s market, but for too many potential home buyers that meant offering a ridiculously low price and then being surprised when no one bit. It is a buyer’s market, and this means home buyers are getting good prices, and often seller concessions (money from the seller to pay for closing costs, for example), but this doesn’t mean that home sellers are giving the house away. I’ve seen quite a few buyer’s who wasted months trying to buy short sales or foreclosures where the lender never even responded, who ended up buying homes that fit their needs and were good deals, maybe even bargains, though not outright steals.
4. Home buyers and consumers are adjusting to the new lending rules – There is no question that it is harder to get a mortgage now than it was a year ago. The tighter financing rules have taken some potential home buyers out of the home buying pool. But financing is available, and there are options for many if not all potential buyers. This was a shock when lending guidelines first started to tighten, now it’s the new normal.
5. Realtors are worried about appraisals – Over the last week I have had 3 conversations with Realtors who were concerned that the offer they were getting on their listing was too high and that they were worried that the property wouldn’t appraise out. This is not the way Realtors normally think. Realtors want to get the highest possible price for their listings, and figure that the details will all work out on their own. To me this says two things: one, that the market is stronger now if offers are coming in high, and two, Realtors are now not only realistic about the market but have a healthy dose of fear, too.

These are again just observations, not hard data, but I think the truth is more complicated than the bleak headlines show. Real estate is different from market to market, and the headlines lump the stronger areas in with the areas with the biggest declines. The market here in the Chicago area is not booming, but it was never as hot as the bubble markets like California, Nevada and Florida, so it makes sense that it would never go down at the same rate.

What we are seeing is a balancing out of pent up buyer demand and sellers who are motivated to sell. The market over all is slow, but some homes are selling quickly. I’m told that about a third of the homes listed are sold quickly, many within the first month. These are the homes that show well and are priced right. Other homes are selling later, usually after price cuts to bring the listing price down closer to the current market. And some homes, because of both condition and price, are going to be on the market for a long time before they sell, if they do at all.

Over the next months we will see if this is a boomlet or a long term trend, but right now the market is active.

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