The outlook for Chicago-area real estate is favorable, according to most people in the housing industry. Sales and prices are up.
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But so is the time it takes to sell houses, according to figures from the Chicago Association of Realtors. In some cases, average market times for 2004 were double what they were in 2003, a hot year with historically low market times.
For instance, in 2003, a house stayed on the market an average of 61 days in Lincoln Park, according to the Realtor statistics. But in 2004, that time on the market had soared to 130 days. In neighboring Lakeview, the story was about the same: 91 days in 2004 versus 62 days in 2003.
One might think that this increase in the amount of time a house takes to sell would slow price increases. But in these two North Side neighborhoods, average prices of single-family homes rose considerably from 2003 to 2004, according to the Realtor data: 20 percent in Lincoln Park, from $1.118 million to $1.42 million; and 11 percent in Lakeview, , from $866,604 to $960,292.
The Realtors’ data are for houses listed on the multiple listing services and don’t include those sold by the owner or many new-construction production homes in the suburbs. Nor do the figures discussed here include condos.
Citywide, days on the market rose 38 percent, to 65 in 2004 from 47 in 2003. At the same time, though, the average house price rose 17 percent, to $301,882 from $258,967.
The picture in many suburbs is similar. Time on the market for all the suburbs combined rose 45 percent, to 72 days from 49.5, and average prices rose 8 percent, to $284,758 from $263,903.
The Barrington area saw time on the market rise from 79 days to 141; Libertyville, from 48 to 79; Winnetka, from 96 to 110; St. Charles, from 49 to 86; and Oak Park, from 30 to 61.
So, what’s going on? It’s taking longer to sell a house these days, but prices are still going up.
“It’s the paradox of choice,” says Helen Jaeger Roth of Koenig & Strey GMAC in Chicago. “There are buyers out there, but they can’t make a decision because there’s so much to see. They think, `Tomorrow I’ll get a better price.'”
There’s so much inventory, Roth says of her market, central Chicago, that buyers don’t have to be in a hurry.
” . . . The prices have escalated quite a lot for single-families, and I think we have a very high price point we didn’t see five years ago.”
Roth gave an example: In 2000, a buyer might have paid $1.8 million for a house. “Now they have it on the market for $2.6 million. There are fewer people who can afford that.
“The market is slowing down, especially in condos, where things have stayed on the market for a very long time.”
That’s especially true in the $375,000 to $400,000 price range for two-bedroom units downtown, she says. There are so many to choose from that buyers take their sweet time.
Bruce Theobald of Lakefront Realty Group, Chicago, says “it’s a great time to be a buyer because unlike in the late ’90s, when we measured market time in hours, not days, buyers have the luxury of time to consider their decision.”
“Market time is not so much a leading indicator as it is a barometer that is tied to the overall state of the economy,” Theobald says.
“In the roaring ’90s, we had a great economy. [But now] you have a couple of factors: the overall sluggish nature of the economy is a cause [for longer selling times]. No. 2, the possibility that the elections may have caused some buyers to delay their purchasing decisions.
“The third thing is . . . Chicago has always been a wonderful place because we have a broad-based economy. That’s very positive. But a large number of Chicago’s largest employers” aren’t showing good financial results. “I think that that would have an effect as well.”
Roth offers another intriguing reason for an increased average market time: new construction. In the city, homes might be listed as soon as the builder breaks ground. It may take a long time to sell out all those units.
“New construction is skewing the figures enormously,” Roth says.
Have an opinion on why it’s taking longer to sell real estate, and what that might mean for the 2005 market? We’d love to hear it.
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Wayne Faulkner is editor of Real Estate. You can contact him at [email protected] or by mail at baiduhai, 435 N. Michigan Ave., Chicago, IL 60611.