Numbers Matter When Looking at Housing Price Drops

July 14, 2009

Residential

Blue Line Train in the Median of The Kennedy Expressway

Blue Line Train in the Median of The Kennedy Expressway

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.

We’d like to thank Andrew Ciscel for generously sharing today’s photo via the Creative Common’s License.

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About Katie Anderson

Katie Anderson is a respected and successful broker at Sudler Sotheby’s Realty as well as a certified appraiser. She specializes in representing clients who purchase and sell condominiums, town homes, single-family homes and income property in the Chicago land area. In her small amount time in the real estate game (she became an agent in 2003) she has assisted in excess of 400 deals and over $200 million in sales and continues to use her skills as a certified appraiser. Katie resides in Chicago’s Bucktown neighborhood with her loving husband and 4-year-old-daughter, where she spends much of her spare time with her family and friends. You can contact her at katie@thechicago77.com or at andersonbraack.com

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  1. Chicago June Home Sales Up Substantially at 25.8% | The Chicago 77 - July 23, 2009

    […] Median home prices in Chicagoland were up 5.0 percent from May to June of this year, going from $200,000 to $210,000. However, this is a drop of 18.0 percent when compared to June of last year when the median price was $256,000. […]