Ok, everyone has an opinion about the real estate market “bubble” in the Chicagoland area. Here is how I see it:
The “need for shelter buyers,” not “the investor buyers,” are driven by demographics. What does this mean? It means that twenty-something first time buyers are buying from their demographic needs; as are empty-nesters buying from their demographic needs. So, do you think anything short of a World War or a massive economic depression can stop this massive move of people and their buying needs and habits? I don’t think so.
What do we really have in the Chicago real estate market? We have a market time that has been lengthier than the last few years, for one. The 30 year fixed is currently in the low 6’s and moving down. The 30 year fixed over the previous four to five years has averaged in the low to middle 6’s and yet, we had great sales and short market times. There are a few reasons for this. Primarily, Fannie Mae and Freddie Mac have tightened up ARMS and interest only loans; which left a lot of the Investor buyers on the fence.
Investment buyers needed the low interest loans and a fast market to flip their properties to score the profits they had in the past. These investor buyers are now running for the hills, dumping properties on the market and even taking losses in order to get out. This impacts both the market time and prices for the resale Seller. They can’t sell quickly and are being forced to negotiate more than they would like. In turn they can’t make their move-up purchase. Therefore, we have a larger than normal inventory of homes waiting for the move-up buyer. This is very real and effecting condos and single family homes from $300,000 to $1.5 million.
What is the solution? Sellers need patience and the willingness to negotiate. Buyers need to realize their time is now. It’s not a “Buyers Market” if you don’t buy and now we have a window of opportunity for both sellers and buyers. The WINNERS will be the sellers who are willing to negotiate and be flexible and the buyers who will sieze the moment. The “meeting of minds” will occur when seller’s and buyer’s overwhelming needs take over.