FIRST, The Illinois Association of Realtors February market statistics show that, in the city of Chicago, sales fell 40.4% in February, to 841 compared with 1,412 in February 2008, and median price in Chicago also sank to $218,250 from $290,000 in February 2008.
The overall sales trends for the larger, nine county region are shown graphically in the second chart on this page posted by Lucid Realty.
THEN, the National Association of Realtors, released data yesterday, as summarized in Kelly Evans and Justin Linhart's story in today's Wall Street Journal, that aggregate resales of single-family homes and condominiums climbed 5.1% in February versus January, to an annualized 4.72 Million Units. Roughly 45% of these sales were foreclosures and short sales - distressed properties selling at a substantially discounted amount. The median price of homes sold fell 15.5% between February, 2008 and this past February
MEANWHILE, Move Inc., released a study that suggests 23% of adults plan to purchase a home in the next five years, and more than half of them (53.5%) are first time home buyers. The Move survey found the housing downturn, now entering its third year, has created significant demand for home ownership especially among first-time home buyers. While 5.8% plan to purchase a home in the next 12 months, 12.8% of Americans say they plan to buy a home in the next two years and 11% plan to purchase a home in two to five years.
AND THEN, consider Gary Lucido's look at the membership at the Chicago Association of Realtors. Lucido reports that the number of realtor members plummeted by over 4,000 between December, 2007 and January, 2009 (13,051), a drop of nearly 25%.
So what does this tell us? Most significantly these studies show that buyers and sellers are not seeing eye to eye on current market valuations. Buyer demand is increasing, but Buyers just do not seem willing to pay current ask prices. As such, many homes lingering on the MLS or being de-listed as Sellers try to wait the market out. At the same time, properties being released from REO inventories are selling, at prices significantly lower than other "conventional" listings. That pressure on prices will only worsen as "shadow" inventory held by REO managers is released back into the markets.
Whatever the reason for the lack of sales, Sellers are not selling and agents are not making commissions. I think we can all reasonably expect that the flow of agents away from the industry will continue. There may be fewer deals to be made, but fewer fish will be competing in the realtor pond.
How are those remaining agents going to survive?
On the sales side, its going to take some extra effort to help sellers understand the dynamic of the current marketplace and the importance of pricing homes realistically. That will be a tough sell for many seller who still measure their home values by their initial purchase price and not against current saleability. Sellers are going to have to be much more patient or they are going to have to lower prices further to find willing and able buyers.
On the buy side, Real estate agents will be wise to focus on first time buyers. But merely targeting those buyers will not be enough.
Consider these following additional facts gleaned from the Move, Inc. report:
nearly half (47.6%) of the home buyers surveyed said they didn't know anything about the first time home buyers credit!
Potential buyers are watching real estate prices more closely today than 12 months ago. Half of all Americans (49.6%) are paying more attention to home values today than they were a year ago,
The average buyer researches properties online for 10 months before contacting a Realtor.
About two-thirds (62.5%) now consider their home primarily a place to live as opposed to an investment.
The old-school way of doing things has been to line a buyer's attorney up after the offer is accepted, perhaps as the offer is being presented. I'd like to suggest that perhaps it is time to start introducing buyers to attorneys earlier in the process.
Timely consultations with an attorney should help assuage first time home buyers fears and worries about the process and the legal ramifications of contracting to buy a home. An attorney can help craft offers on terms that are more protective of "newbies." An attorney can help answer the myriad of questions that first time buyers want (and need) to ask. Bringing a competent & service-oriented attorney into the process early will help build your credibility and social standing with your clients. A suitable attorney will also ease your work load, as you can now refer all those questions and worries for the lawyer to deal with. Such real estate agents are able to better focus their time on finding the right home, at the right price, for the right client.
I have been helping first time home buyers close their contracts successfully for more than 18 years now. I find this aspect of my work especially rewarding, and I have developed a fairly comprehensive system of letters and tools that help prepare and educate buyers as they move from offer thru closing.
Let me know if you would like to know more about pre-contract legal consultations for first time home-buyers.