If it wasn’t the two failed offers or the missed opportunities, it was a tape measure that convinced potential homebuyers Brian McCord and Jamie Blondin that they just weren’t moving fast enough.
When they went to see a two-flat in Chicago’s Bucktown neighborhood earlier this summer, they liked everything they saw, except for the other potential buyers also looking at the house.
“Not only were they looking, they had a measuring tape,” McCord said. “And that made us much more nervous,” Blondin added.
The couple promptly offered $626,000 for the $649,000 house, 96 percent of the asking price. This time, they were successful. The transaction closed earlier this month.
The circumstances that McCord and Blondin encountered — shorter marketing times, multiple offers and bidding wars — are popping up with increasing frequency in the Chicago area and creating a new class of anxious home shoppers forced out of their comfort zones.
Buyers still have the advantage in the local housing market, and there are still properties desperate for any buyer interest. But a confluence of factors is accelerating the pace of transactions in both choice and more stressed neighborhoods.
Mortgage interest rates, while they have ticked up the past four weeks, remain well under 4 percent for a 30-year, fixed-rate mortgage. More sellers are setting realistic list prices. Meanwhile, about 95 percent of apartments in downtown Chicago and the suburbs are occupied. That is pushing up average rents and prompting a harder look at the merits of buying.
Six years into the housing crisis, consumers who have sat on the sidelines are trying to take advantage of it all, as are investors who are scouring the market for properties to turn into rentals.
The market trends are forcing a re-education of clients and real estate agents alike. It used to be that when agents told each other there were competing aggressive offers on a listing, the agents might call each other’s bluff.
But at least three times this year, clients of Warren Davis, a real estate consultant at Urban Real Estate, have lost deals to offers that he thought were just bluffs. Now Davis has taken to role-playing with clients, pretending that they find a property and training them to make a decision quickly.
“No one likes to rush,” Davis said. “I tell them when you find a good opportunity, you have to pounce. You can’t hesitate. When you go back and see it under contract, you go through an emotional loss.”
Some of the quickened sales pace is seasonal, but it’s also due to a lack of inventory. At the end of July there were 34,816 residential for-sale listings in the nine-county Chicago area, according to Midwest Real Estate Data LLC, the local multiple-listing provider. A year ago, in July 2011, there were more than 46,000 active listings. Likewise, the number of condominium and town home listings, 18,349 in July, was a 38 percent decline from a year ago.
Some homeowners who would like to sell their homes can’t do so because they are underwater, owing more on their mortgage than the property is worth. Others may be waiting for true appreciation in the market to net a real profit. As a result, the average marketing time for homes in July was 16 to 20 percent shorter than it was a year ago, 122 days for houses and 134 days for attached homes.
“The serious buyers are all looking at the same thing,” said Mark Reitman, regional manager at Redfin. “A couple of years ago, there was more inventory so there was more choice.”
Some listings come onto the market and are gone within days. A Naperville homeowner let Kay Russell, an agent at Keller Williams Fox Valley, place his home on the multiple-listing service on a recent Saturday evening but didn’t want any showings until Monday so he could finish a few last projects.
“My phone starting ringing off the wall Sunday,” Russell said. “People were hopping all over their agents, saying, ‘We want to see that house.'”
Russell appealed to her seller, who agreed to showings after 6 p.m. Sunday. One potential buyer made an offer, a low offer, that night. The other potential buyer made a higher offer, closer to list price, on Monday which the seller accepted. It is now under contract.
“We didn’t price it for a fire sale,” Russell said. “We priced it right at market. A couple years ago, we didn’t know what the right prices were. We finally know what the right prices are. We don’t like the prices, but it is what it is.”
While the rising interest in home purchases is encouraging, it would be a mistake to think the Chicago area is headed for a repeat performance of inflated home values and bidding wars far above asking price. Area home prices rose in June, for the fourth consecutive month, but remain below their year-ago levels, according to the S&P/Case-Shiller home index released Tuesday.
Appraisals remain conservative, so any buyer who bids far above market value either is unable to secure mortgage financing or has to bring more money to the table. That is creating an advantage for cash buyers, many of whom are investors.