From this week’s Business of Life-Crain’s Communications
By: Kevin Davis April 21, 2008
One year ago, Chicago attorney Donna More had to put her downtown home up for sale after landing a new job in Cincinnati. She’s still looking for a buyer.
Ms. More commuted between cities for a few months but has since moved out of state with her husband and 4-year-old daughter. She originally listed the six-bedroom home in the Kingsbury Estates community for $5.3 million. “I thought, ‘This house is so beautiful, it will sell right away,’ ” she says. “I guess I’m surprised.”
After seeing little activity on the home, Ms. More switched brokers, turning the listing over to Karen Peterson, a 23-year veteran who specializes in luxury properties for Coldwell Banker Residential Brokerage. Ms. Peterson has twice lowered the asking price; now it’s $4.7 million.
“I had a person come to me with an offer of a million under what the property was listed for,” Ms. Peterson says incredulously. “People want bargains. You just say, ‘No, thank you.’ There are a lot of bottom feeders out there.”
Because Ms. More and her husband, who owns a public relations firm, are able to cover the cost of two mortgages for now, they don’t intend to sell below what they think the home is worth.
“People who own higher-end properties can afford to ride out the storm,” Ms. Peterson says. “Some prices need to be adjusted. Some don’t. The majority of sellers I’m working with are not having fire sales. There’s this false belief that there’s a lot of inventory people want to get rid of.”
The reluctance of sellers to part with their properties for bargain-basement prices — coupled with buyers who believe sellers are desperate and expect deals to match — is contributing to lengthy market times, especially on the higher end.
Louise Study, a broker for Rubloff Residential Properties in Chicago says that asking prices, especially for higher-end homes, generally are not dropping by much.
“When you get to the upper echelon, there’s only a small number of buyers who can afford it, anyway,” she says. “The prices aren’t going down, but the market time is going longer.”
In Chicago, average market times for homes priced at $1 million and higher in 2007 were six months, compared with five months the previous year. The average sale price was $1.7 million in 2007, up from $1.67 million in 2006, indicating that value has been holding.
This year, overall average market times at all price points in Chicago were just over five months, with an average sale price of $312,530, based on Multiple Listing Service of Northern Illinois figures from February.
Yet these numbers are not always an accurate reflection of how long an owner has been trying to sell a property. A property can be “de-listed” for 90 days, allowing the official market time to reset to zero on the Multiple Listing Service database.
The advent of spring has given agents some hope.
Tony Zaskowski, owner of Property Consultants in Chicago, has been experiencing the same long market times, especially with higher-end new construction. “Some people get scared” at seeing long market times, asking, “What’s wrong with it?” he says. “Why didn’t this sell?”
One of his properties, at 1759 N. Wilmot Ave., has been listed for about two years. The home was built originally by developer Micheal Skowron, who says he intended to live there but decided to sell instead.
Mr. Zaskowski inherited the listing from another agent who originally sought $3.1 million. He took it off the market, lowered the asking price to $2.8 million and re-listed.
Two offers fell through because the potential buyers were unable to get financing. “That’s a big problem,” Mr. Zaskowski says. “They’re having problems securing the loans.”
Mr. Skowron says he was testing the market with this home. “I don’t do spec homes any more,” he says. “When you start paying interest and carrying costs on properties that have not sold, you can’t continue to do that.”
Homes that do sell move relatively quickly. A Prudential Preferred study of the area showed that of all the homes that had contracts pending in January, 65% sold within the first 45 days and 81% within 90 days.
[edited by CNasser]
©2008 by Crain Communications Inc.
Fun Chicago Thing today:
Sailing! – Sign up for lessons through the Chicago Park District! With over 18 miles of lakefront in Chicago….why not!?