Last week after re-reading a Chicago Tribune article and then reading another perspective on the market from Reuters I had to ask myself, how does the real estate market in the South Loop compare to the greater geographic areas referred to in these articles? What does it mean in these two articles that home values are still declining, wealthy people are starting to move again, but the middle range of homes continue to sit? Are these claims apparent in the South Loop’s inventory?
The Reuters article divided types of homes into three price categories, under $100,000, $100,000–500,000, and over $500,000. I used this as a basis to determine what the inventory is in the South Loop (areas 8033 and 8032 south of Congress) within these categories. The answers will help guide us in understanding how the South Loop real estate market is doing comparatively.
At the bottom end, homes are also on the move as investors pay cash for foreclosed properties to rent them out.
There are only 12 active properties priced under $100,000 in the South Loop. This is an interesting bunch as in the past six months 14 have sold and 18 are under contract. At first glance it sounds like the articles are right and with only 3 months of inventory lower priced properties are moving. However, if one looks carefully at the active properties it shows that their minimum list price is a little higher than units that have sold and are under contract. They also have a slightly higher average market time. Have the gems been bought up? This may be an indication that this market is starting to lose its momentum in our neighborhood.
There are 213 homes on the market that are priced above $500,000, which is 14 months of inventory and 492 that are priced between $100,000–500,000, which is 15 months of inventory. This means in the South Loop market we are not at this time seeing a big push in the luxury market. In fact both the luxury and middle markets are what Gary Keller of Keller Williams refers to as Survival of the Fittest. The more inventory there is on the market the more picky buyers often are which can lead to tough negotiations and lost deals.
However, what can be realized by sellers who have the means to take a loss on their property is that while they are selling at a loss, they are also getting a great deal on the property that they buy. Sometimes it’s easy to get caught up the buy low, sell high mentality of the stock market. Real estate is a market after all, but real estate is more like a long term investment, it’s not meant to be treated like a day trade.
Next time you consider making your next move in this market keep in mind that as long as you are going to buy when you sell you are still in the game. You won’t know how much you won until you make your final sale. I think the wealthy families discussed in the Reuters article are viewing the market in this way. As the article quoted,
People who have decent income are saying, maybe I can trade up, buy a better property,” said Bill Hardin, director of the real estate program at Florida International University.
“Some people are even saying, I’m willing to take a loss on the property I’m selling now to get something I couldn’t buy during the housing peak.
They recognize that they are taking a loss on the sale, but by getting a good deal on the buying end the value of their real estate portfolio is either the same or more than if they did not sell and stayed in a home that was not right for their lifestyle anymore.
There are two lessons we can learn from the current South Loop market, when it’s time to get a new home following your values is more important than getting caught up in price. If you can give someone a deal on your current home you can find a deal on your new home. When you are ready to make the move it’s going to take a careful pricing strategy, time, patience, luck, and most importantly a lot of work from you and your agent in keeping the home in great condition and letting everyone in the world know what a great gem you have!