Representing both buyers and sellers I have learned the impact of price changes in this particular market. It is home-buying process is not only about the value of the property, but also the buyer’s perception that the seller really wants to sell.

Sellers Must Acknowledge Price Pressures

The underground walkway between Concourse C & B at O'Hare Airport

Sellers need to remember, particularly right now, they need to do everything to capture that buyer. I recently had potential buyers on a listing of mine. The buyer’s agent let me know it was between my listing and another very similar home in the neighborhood. During the time these purchasers where making their mind up, the other property lowered their price, not much, but still a reduction. My seller’s would not. Their response was bring us an offer. I diligently tried to convince the other agent to get something on paper and we would work with it. The buyers opted to go forward on the other listing. That price change said to them those sellers really wanted to sell.

It Is All About the Price Change

Showings of listings are currently more sporadic then ever. A seller cannot wait to see if a buyer who came through is going to put in an offer or anticipate that the next buyer will put in an offer. Make the necessary adjustments now. We are seeing some buyers come back months later. If there is still no adjustment they will probably move on again. Don’t you want to sell before then?

According to Trulia, more than a quarter of the homes on the market have reduced their prices for the fourth consecutive month in a row. Chicago ranked number 16 with 30% of the homes on the market taking an average of 9% price decrease.

Buyers Looking for Signs of Serious Sellers

Working with several home buyers right now, I see great differences compared with buyers in the past. They are not anxiously waiting for what is new on the market?they are looking for the reduction. They are not just watching for prices to fall but looking for the sign that the seller is serious in this market.

Small changes can generate an offer and get the negotiations started. We are starting to see multiple offer situations with larger changes. If a property has been sitting on the market for a while with no changes, the buyers think the seller is not serious and will be difficult in the negotiations.

Home buyers who have been out there looking are really only interested in a new listing if it is priced at?but usually less than?the comparable properties they have been looking at. Sellers can longer test the market with a “try me” price.

Marketing the Property

It is price that gets the offer but is marketing that gets the buyers in. The first showing is now the photos online accompanied by the virtual tour and its presentation on all the dozens of common real estate websites. Sellers need to make sure their listing is properly marketed and priced by today’s definition or you will not get the second showing.

We would like to thank Andrés Larsen for kindly sharing today’s photo via the Creative Common’s License.

Upon a mixed bag of numbers released last week by the National Association of Realtors, Standard & Poor?s Case-Shiller Housing Numbers released this morning show continued movement upwards making July the sixth month in a row with slight gain. ?The rate of annual decline in home price values continues to decelerate and we now seem to be witnessing some sustained monthly increases across many of the markets? says David M. Blitzer, Chairman of the Index Committee at Standard & Poor?s.

Locally, Chicago had a 2.7% increase from June to July. The year-over-year numbers show a decrease of 14.2%.

What Do All These Numbers Mean?

Chicago's Skyline from the West Loop

Everyone is looking at the historical data to predict the future. As Realtors®, that is what are clients are looking to us for. Should they list? Should they buy? Should they wait? In the big picture, there are so many variables that are effecting the housing market including unemployment, the first-time-buyer tax credit, and the lending industry. The ?should?? for the buyers and sellers depends on their individual situations.

For sellers it comes down to, can you afford to sell or do you have to sell? If you want to sell, do you have the equity in your property to sell at today?s market value or can you write the check for the difference if need be? If not, it is probably not the time to list. If you must sell for whatever reason, we have to ask the same questions but if you don?t have the equity in your home or cannot write the check, then it is time to explore the short sale option and make sure the seller clearly understands what it involves.

For home buyers there are great opportunities, but they have to be the right opportunity. Buyers must also be better financially qualified than in the recent past, as well look at the long term value as there will probably not be a short term gain. For the true investor it is being about a bottom feeder with cash. Purchasers who are looking for a home should be looking for the best value for the space that will work for them. This is going to be defined by the specific neighborhood?s conditions. Some factors to take into account are inventory levels, past pricing performance, foreclosure and short sale rates, and most importantly the most recent comparables. How long do you plan to be in the home?

In the height of the frenzy of the real estate market not so many years ago, buyers would over look conditions they could not change about a property. For many years to come, price is going to be the only factor that will overcome that you cannot change. Remember, every buyer becomes a seller.

We’d like to thank Seth Anderson for sharing today’s photo via the Creative Common’s License.

The week after Labor Day traditionally marks the beginning of Chicago?s fall real estate. As this has been a period of non-traditional activity, I have thought carefully about what are my expectations. The strengths and weaknesses in the marketplace will depend on what type of property in what area at what price. There is no blanket citywide answer. The one constant about Chicago real estate is that it is local to the building, the block, and the neighborhood.

Buyers

The Jay Pritzker Pavilion

Overall there will be fewer home buyers out there than in years past but more than we have seen in the first months of this year. The majority of buyers have gotten themselves in a stronger position financially, coming into the transaction with larger down payments or just paying cash. Those who have the wherewithal to purchase are now actively engaging. These buyers have the opportunities to take advantage of short sales and well priced homes. If they are contracting to purchase a short sale they must have a clear understanding, no matter how financially qualified they are to buy, that the transaction is controlled by the sellers’ lenders.

The strength of the lower end/first time buyer will depend on how the government reacts to the rising default rates on Federal Housing Authority (FHA) loans as reported in the Wall Street Journal. If FHA is forced to tighten its guidelines it will impact a large number of new construction and conversion condominiums which have typically been entry level products. FHA loans became popular with the demise of subprime mortgages, enabling purchasers to get into homes with only 3.5% down payments.

Sellers

Regardless of market conditions it is still about the space. If the space works for the potential buyer then pricing becomes equally important. Over the last months home values have been leveling off. With that said, overall values are significantly lower than in years past. A home?s value is based on the last three sales in the last six months of comparable properties. Because of specific areas of high inventory levels, high rates of default, and foreclosure there are still pockets of the city that will continue to see devaluation.

What you paid for the home factors into your decision to list. Can you afford to sell it now for the current market value or do you have to sell? If you have to sell, will it result in a short sale? Most listings will not get many showings but each and every one is an opportunity.

REALTORS^®

There continue to be far fewer of us. It is down to 10% of real estate professionals doing 90% of the business. To get a transaction closed is a combination of the years of expertise, number of transactions, and the experience of working as a REALTOR^® in this perfect storm of the last eighteen months. These are the agents who have the skills to bring the offers, get them negotiated, and get a higher percentage of successful transactions in an environment where many contracts never get to the closing table.

The marketing of properties has changed as quickly as the real estate market itself. It is no longer about the Sunday paper, the glossy magazine ads, and entering listings into the MLS. It is all about Web 2.0 and social media. Knowing how to use the brand your brokerage offers, supplemented by the brand you have created for yourself as an agent to get your listings the greatest exposure. A professional agent must know where listings go and how to get them optimized. Saying, ?the listing will go into the MLS and will be on the Internet? is not providing a service.

With a decade of experience as an active REALTOR^® I am optimistic. It is about overcoming objections, finding solutions, and understanding how to market. It is also gaining knowledge from my transactions as well as from the expertise of my colleagues. It is about constantly educating myself to accomplish what I am hired to do: the sales and marketing of real estate.

We would like to thank Sergey Gabdurakhmanov for sharing today’s photo via the Creative Commons License.

Regardless of real estate market conditions, our clients hire us to get their properties sold. Sorting through this week’s news and numbers regarding how we market those listings, there still seems to be a huge disconnect between how most agents think their listings are marketed and the realty of the fastest growing resources that the consumers are getting their information from.

Just Being in the MLS Does Not Cut it Anymore

Internet use is evolving and isn't going to go away

It is all about turning your listing into a story now. The websites that are gaining most of our consumers attention are not depending on the information feeding from the MLS. They are looking for agents to contribute information on their listings. Our consumers are buyers, sellers and other Realtors®. They are going in masses to sites like Zillow and Trulia, sites that take basic information from feeds, but are looking to the listing agents for more pictures, open houses and additional descriptions about the property. Sites like these mix social networking and listing data. They offer free blogs and question and answer pages to engage professionals with consumers. The sites are doing a good job evolving as social media evolves.

Blockshopper.com is another example of MLSs losing their relevance in marketing both agents and listings. They pull their data from tax records. Owners can “claim” their homes. Agents who establish accounts can add notes to their listings and previous sales. It shows transaction history of the property. This site is a work in progress, as every site needs to be.

Does Your Broker Do Your Showings?

Think of it this way: it is the agent, not the broker, (the difference explained here) who has viewed the property, evaluated the pricing, condition, and sales potential. You now have platforms to communicate all of this information. The new generation of sites depend on broker feeds as a foundation and build upon that with agent participation. What prospective sellers see on these sites is your first interview and then the follow up in getting a listing. When buyers are searching for a property what they see online about your listing is the first showing and if there is any interest it is the third showing. The brokers provide agents with the tools but it is the agents that sell the properties. It works the same way in the virtual world.

These sites are growing at a faster pace than traditional sites because they are providing the transparency the consumers are looking for.

31 July 2009 ? Chicago?s North Shore high-end market has been especially hard hit by the real estate market?s downturn as reported today on Rismedia. Even offering creative incentives and major price reductions has not helped in moving luxury properties in Chicago?s north suburban areas. According to the North Shore Association of Realtors only 154 single family homes over $1 million dollars have been sold this year. If this trend continues for the remainder of the year, only about half the homes will have been sold compared to last year and less than two thirds of the 935 homes sold in 2005 in the over $1 million market. The North Shore?s bad news is Chicago?s good news. The city market has fared better as buyers are taking advantage of the short sales and favorable pricing on luxury properties, attracting more buyers to stay or return to the city. ?Upper bracket short sales have become an art,? says Chaz Walters, principal and broker associate of Sudler Sotheby?s International Realty. Walters has had success selling upper bracket properties and sees sales happening only when the sellers will accept the reality of current market pricing and making the adjustments accordingly.

First-time buyers have been driving the market in Chicago for months. They are taking advantage of both the low prices and the nearly record breaking interest rates available to them. First-time buyers are also helping the market by buying homes from sellers wanting to also take advantage of the market by buying something larger. In my experience, this is typically the beginning of a larger market improvement.

For Most the Tax Credit is a Bonus, Not Reason to Buy

The Chicago Skyline Viewed from Buckingham Fountain

The $8,000 first-time buyer tax credit has been a nice bonus for many of these buyers. I haven’t seen evidence that the tax credit was the driving force for first-time buyers in Chicago; they look at it more like an added bonus to the already low prices and interest rates. It has helped push a few on the edge of the decision to buy or rent to move toward buying, but overall it has not been a tremendous influence on people’s decision to buy.

The number of first-time buyers has been strong over the last three months. Multiple offers (have not said that in a while!) have been taking place on well-priced homes that appeal to first-time buyers. The trend looks like it will continue, especially with many flexible first-time buyers taking advantage of short-sale opportunities.

The deadline for the first-time buyers tax credit is fast-approaching: you must close by November 30 and most closings are now taking much longer?perhaps averaging 60 days. Because of this timer constraint, I expect some will act a little more quickly now. However, it will most likely not have a large impact either way.

Nice If Extended, but Not Necessary

It will, of course, be better if it is extended but should not have a tremendous effect if it is not. The tremendous supply of places for sale in the Chicago area, aggressive pricing by some sellers, and low interest rates will be much more important. But, hey, throwing money at somebody will never hurt.

We’d like to thank Albany Tim for sharing today’s photo via the Creative Commons License.

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.

13 July 2009 ? Trulia reports that nationwide as of July, sellers cut $27.1 billion from asking prices. This is the first month Chicago has made the top ten list nationally. The volume of price reductions in Chicago was $229,444,054, ranking the city at number seven. Thirty one percent of active listings took an average of a 9% reduction in list price. The price reductions appear to be having a direct impact in the increase in the number of pending homes sales. The cities that have been historically hardest hit showed the biggest improvements from a month ago such as Las Vegas and Los Angeles.

According to Pete Flint, Trulia Co-Founder and CEO, ?All real estate is local and we?re seeing glimmers of hope as price stabilization occurs in major cities across the nation, including some of the earliest hit cities that have experienced huge declines in the past few years. On the flip side, perhaps sellers are pricing their homes more rationally to get them off the market as soon as possible.?

As I had time to reflect over the holiday weekend, I thought back to all that happened in the month of June.

My Personal Market Activity

Roses...not rose-colored glasses

Buyers re-engaged in the marketplace, resulting in sold properties. Sellers who want to sell are listing at prices to sell, not just to list. Communication between the Realtors®, lenders, buyers, sellers and attorneys is key in keeping the deals together and getting them closed.

I have received negative comments in response to my positive outlook on the market?the first signs we are seeing of stabilization from the numbers that are being published. I have run into agents I know who are amazed when I say I am busy. They are thinking of getting out of the business. I am not, ?wearing rose colored glasses? as commented on one of my blog postings. Rather than walk away in frustration, I decided I have to continually educate myself to the dynamics of the ever changing market. Learn from my most current experiences. Most importantly, work to solve the problems that arise from each of the challenges that come with every transaction.

Americans deserve the opportunity to achieve and sustain the American dream of homeownership. It is still recognized as one of their most important assets. I am a Realtor®. This is what I do.

30 June 2009 ? Changes in the Housing and Economic Recovery Act and The Home Ownership and Equity Protection Act that were made last October will go into effect July 30, 2009. All lenders and brokers must comply with the new rules. It will impact the real estate industry every single day. Realistic expectations will need to set with all parties, such as: 1) 30-day minimum closing date; 2) All closing figures for the buyer and the seller must be submitted to the title company within three days prior to closing. Currently, these numbers are submitted 24-hours prior to closing; 3) If the APR interest rate that was quoted to the buyer is off by even an 1/8th of a point, the regulation calls for a mandatory three day freeze. What this means is that the property will not close that day. Real estate agents need to be aware of these changes in order to prepare their clients. Moving day will be even more chaotic. Clients will need to understand that they will need to build in a minimum of three days and that the possibility is greater than ever that the closing will be pushed back.