The Chicago Tribune posted an article in yesterday’s Business section titled, “Chicago housing prices drop even faster.” In the article there was a graph which posted home prices and their price reductions broken down by neighborhood. The news source for the pricing was Trulia. Trulia is a website where seller’s and agents alike are welcome to post their homes for sale. Same concept as Zillow, Craig’s List, etc.
Granted, prices are dropping in the Chicago land area. We obviously have not hit the bottom of the market. The only way to know we have hit the bottom is when we see appreciation on properties. The problem with the article is that it does use Trulia as a source. Prices may have dropped in certain areas but it does not take into consideration the difference between condos vs single family housing. It also uses the average number. The average number in statics takes into consideration all numbers; this includes foreclosures as well as short sales. These transactions are not arms-length transactions and cannot be accounted for in general real estate sales. A better number to be used in such an analysis is the median price point. The median is the number that is the most accurate and used by appraisers to adjust for market downturns.
There are many issues with the article that was written. One that I would like to point out is that the typical buyer has no idea what it takes to purchase a foreclosure or a short sale. Both of these transactions can be extremely time consuming and frustrating. One has to define if they are a short sale buyer or not. There are deals to be had all over the city of Chicago. If a property has been seasoned on the market and the seller has reduced their price a few times, that is the indication that they are negotiable. You can pick up a nice property without all the headaches and still get a great deal. This is truly a buyer’s market. If you have a good agent that does their homework, you do not need to deal with foreclosures or short sales.
I do agree that sellers need to be realistic with their listing price. A property may have been worth $100,000 more two years ago. What everyone needs to understand is, it is no longer two years ago. People change and prices rise and fall. Property values have certainly declined from two years ago. The only way to determine what a property is worth is to put it on the market and find out what a “typical” buyer will pay for that property. That is the true value.
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