Foreclosures Among Several Factors Prompting Sellers To Adjust
By Mary Ellen Podmolik, Chicago Tribune
It's the middle of July, and home sellers are starting to feel the pressure. Elmwood Park resident Dan Gongola is among them.
A month ago, he listed his gutted and rehabbed five-bedroom, four-bath octagonal bungalow for $549,900, almost $25,000 higher than his real estate agent advised. "I said maybe I'd get lucky," he said.
On July 2, with few showings to speak of, he chopped the price far below his agent's original suggestion. The new price tag of $485,000 is a reduction of almost 12 percent from the list price.
Real estate agents have been advising sellers for months that they were going to have to let go of a good chunk, if not all, of the appreciation their homes enjoyed during the past five years. Now it appears that a confluence of factors -- fluctuating mortgage rates, sales comparisons that include bargain-price bank foreclosures, lingering job insecurity, a real estate market headed into its August lull and a first-time buyer's tax credit that expires Dec. 1 -- are giving their argument more credence. And sellers like Gongola are taking their advice.
As of Thursday, 31 percent of Chicago-area homes listed for sale had at least one price cut, compared with 29 percent of listings in June and 26 percent of listings in April, according to Trulia Inc., a San Francisco-based provider of real estate data. Nationally, 24 percent of homes on the market have had at least one price cut.
Drill deeper into the data, though, and that 31 percent local average is healthy compared with what's going on in some neighborhoods. In the East Loop near Millennium Park, prices have been cut at least once on 43 percent of the listings, with an average reduction of 6.6 percent. In the sections of Lincoln Park and Logan Square that make up the 60614 ZIP code, 35 percent of the listings have price cuts, with an average reduction of 8.2 percent. In Elmwood Park, sellers have slashed, by an average of 9.6 percent, prices on 40 percent of the listings.
"Sellers say, 'I'm not going to give it way,' " said Randy McGhee, an agent at Koenig & Strey GMAC Real Estate. "If you want to sell, you will be giving it up for what you paid for it or less in the last four years. If you want to sell it and you're thinking of a reduction, don't wait until September. Do it now."
In some areas of Chicago, the issue is condos that were bought by investors who are trying to shed them at a loss. They are advertised as short sales, a private transaction in which an owner, with lender approval, sells the property for less than the amount owed on the mortgage.
"My last three buyers and a current one only want to see foreclosures and short sales because they believe that's where the deals are," said Kimberly Oehmke, an agent with @Properties.
"It's hurting the person who has a great property and isn't in the short sale-foreclosure predicament," she said. "Anybody that is not a short sale, we just beg our clients to rent it out, just hold on until next year."
Foreclosures, meanwhile, continue to roil the market, being scooped up more quickly and cheaply than traditional listings.
In the past 90 days, 43 percent of home sales in Cook County have been bank-owned foreclosures, according to data from Clear Capital, a Truckee, Calif.-based provider of real estate valuation data to investors. Nationally, 35 percent of sales were foreclosures.
They've sold faster, too, with an average local marketing time of 53 days for a foreclosure compared with 73 days for a traditional sale.
The impact of foreclosures is partly to blame for local home values sinking in April to the same level they were at in mid-2002, according to the S&P/Case-Shiller Home Price index released late last month.
In Elmwood Park, Gongola's real estate agent, Sally Haynes of ERA Realife Realty, blames much of his troubles on foreclosures and the too-high original home price; in a better market the home might sell for slightly over $500,000. She was surprised, pleasantly, when he opted to make the dramatic cut."
I know it's worth more than that, but with the market the way it is right now, I have to go with what's comparable in the neighborhood," Gongola said. "That's why I did the big reduction," he said. "Let's not play games here. I wasn't going to lower it $10,000, and then in another month another $10,000. People will [now] say, 'Hey, this guy dropped $70K, we should go look at this.' "
Haynes has had the same difficult conversation with sellers in other neighborhoods who are eager to grab hold of any market uptick."
I'm seeing the same thing in Des Plaines and Portage Park," Haynes said, noting that her pool of buyers has increased significantly in the past three months. "They are looking for a deal."
THIS WEEKEND IN CHICAGO - CHICAGOANS PICKING-UP WHERE THEY LEFT OFF!
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What an awesome Memorial Day Weekend we had here in Chicago last weekend,
and combined with a short work week, this weekend Chicagoans are picking-up
where...
