Keeping up with Chicago's North Shore Real Estate Market!

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Wednesday, October 10, 2018

Are we there yet?

Watching the market can become a fulltime preoccupation with real estate agents. It's essential to understand a local market conditions both for pricing a prospective listing and for helping buyers make offers. We've got all sort of indicators and reporting that helps us figure out whether the market is Hot or Not.  While the reports are useful and informative, there are other signs to watch... here are a few others:

Market Time - It's been my observation that market time is really a great cue to whether the housing market is doing well or not. In general, if a home is priced correctly it should go under contract in less than 90 days -- in a slow market. In a hot market, it usually is under contract in than 10 days. Buyers move very quickly in a hot market, because they know the property might not be there, if they don't. When the market tanked and nothing was moving, market times -- even on fairly priced homes -- become prolonged. But then I had a listing a few years ago: two offers on the property for full asking price the day BEFORE we listed it in the computer... clearly a hot market.

Scarcity of great homes - I remember in the boom years how certain houses were just not there (e.g., reasonably priced homes in East Lake Forest).   I remember working with buyers in 2004 and it was incredibly difficult to find nice properties - at all.   This happens when a market is hot.

Multiple Offers - you know the market is heating up when many homes are receiving multiple offers.   I remember a few years when it seemed like every deal I was working on had multiple agents involved... Multiple offers are incredibly stressful, because someone always loses.  That is pretty clear sign that the market is getting warm. 

Surprising Sales - While unusual, sometimes properties sell for higher prices than you expect.  There is no rhyme nor reason for it -- but if you look at the market as a reflection of the economy at large, maybe things are improving... a new company has come into the area and has added new buyers with different income levels.   Maybe it's a sign of a healthier market -- or maybe it's an anomaly.   In either case, it's something to watch.   

Inventory Trends -- If you read my monthly reports, you know that I believe watching inventory levels and understanding the months supply of property is the best way of telling the health of a market.   When the inventory of available properties increases, prices go down   and market time tends to increase .   The reverse is true when inventory levels go down.   When pricing your home, try to understand the inventory levels in the key price point.   For example, say you have house that has a estimated market value of $775K - $825K.   
Inventory levels in your market:
$700K-$750K - 4 months supply
$750K - $800K - 8 months supply
$800K - $950K - 12 months supply

Given that scenario, I would be inclined to price my own home around $775K... see if I can't get someone to stretch into that price range, where there is a shortage of supply -- I definitely wouldn't price my house over $800K when there is already a surplus of available homes.

So are we there yet?   Is the market hot?  Look for the signs -- they are certainly there!

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