In Chicago and the suburbs, spring and summer is prime time for real estate, with the first half of the year the busiest season for homes sales. Here in the near west suburbs, inventory is up and sale prices are down, but houses are selling.
A snapshot of the current market shows us what the professionals say is happening in our market for the first half of 2018.
For John Lawrence, owner and managing broker of Weichert Realtors Nickels Group, the typically hot spring and early summer selling season had a different feel this year.
“In the spring when $300,000 to $500,000 homes in Oak Park are flying off the shelves with multiple offers, we feel like the market is good. That didn’t happen this year,” Lawrence said. “The market has a very uneasy feel, and a lot of people were saying the market was way down, but the data doesn’t back it up.”
Lawrence said that single-family homes are selling and says average market time was the same 79 days for single family homes from Jan. 1 through June 10, 2017 and for the same period in 2018.
But, when Lawrence parses the data, he does see some differences in those averages.
“Last year, there was a combination of homes that flew and those that sat,” he said. “This year, more properties are sitting a bit longer.”
Longer market time
Michael Nowicki of Ideal Location Oak Park says that homes are taking longer to sell and buyers are interested in a lower price point.
“Over the years, Oak Park’s sweet spot has been $400,000 to $600,000,” Nowicki said. “Now it seems to be $350,000 to $525,000. I’ve seen plenty of houses that would have sold in days in 2016 and 2017 now sitting for 45 days.”
Nowicki also sees a change in high-end properties.
“Our higher-end market has slowed tremendously,” he said. “Market time has increased, and the number of buyers in this price range seems to have decreased. Don’t get me wrong, buyers are still out there; it just requires more patience to sell higher-end homes.”
The numbers back him up. In the first half of 2017, homes in the $900,000 to $999,000 range had an average market time of 93 days, and homes in the $800,000 to $899,000 range averaged 70 days on the market. For 2018, those numbers were 221 days and 95 days, respectively.
The outlier is average market time for homes between $1 million and $2 million, which fell from 2017 to 2018. In the first half of 2017, two Oak Park homes in that category sold with an average market time of 194 days. In the first half of 2018, five $1 million-plus homes sold in an average market time of 116 days.
While the market time decreased and the number of highest-end sales increased over this period in 2017, an examination of the five closed sales reveals that three of the five originally had been listed for sale one to three years prior to selling.
Lawrence said that once a home has been off the Multiple Listing Service for at least 90 days, its market time starts over when the sellers relist. He also pointed out most of the sellers of those homes came down in price from their original list prices saying, “Most of them sold for just over one million.”
For Lawrence, one of the bigger differences this year is the number of properties on the market. In 2017 at this time, there were 162 single family homes on the market in Oak Park. This year, there are 209. He states,
“That’s why the market feels like it does,” Lawrence said. “Buyers have more choices.”
Tax ‘tipping point’
Lawrence pointed to a few reasons why there might be more homes for sale this year, including a highly publicized violent crime wave that swept through all of the western suburbs just before the spring market.
He also says that property taxes are a big part of the equation in Oak Park today.
“Anecdotally, there is the tax situation,” Lawrence said. “We’ve always said, ‘What is the tipping point?’ I think we’ve reached it.”
Steve Scheuring of Baird and Warner agrees.
“We used to have buyers who would come and look at a $500,000 house with $8,000 to $10,000 in taxes,” Scheuring said. “The taxes were high, but considering Chicago Public Schools and private school tuition, they were cool with that. Now, with that same house having taxes of $15,000-$16,000, the buyer is no longer cool with that. We’ve reached a saturation point.”
Nowicki says his clients are definitely influenced by taxes.
“Seeing affordable houses with unaffordable taxes has been a hard pill to swallow,” Nowicki said. “The realization that property taxes affect how much house you can afford has been frustrating for them. Prices are down, and taxes seem to be why.”
For Lawrence, these concerns might be playing out in the difference between median list price and median sales price, which has dropped roughly 2 percent.
“Basically, the extra competition is causing sellers to make larger price reductions this year compared to last year when a home doesn’t sell right away, and then the buyers are able to negotiate harder, knocking an additional 1 percent off the asking price,” Lawrence said. “The sky is not falling, but if tax bills go up any further, I think the sky will fall.”
From Jan. 1 to June 10, 2017, the median single-family home sales price in Oak Park was $470,000. In 2018, that number has dropped to $460,000. Lawrence thinks that the number of homes on the market give buyers the incentive to negotiate prices more and notes that taxes play a role here as well.
Stating that buyers tend to consider monthly expenses as a combination of mortgage payments and taxes, Lawrence says that tax bills contribute a lot to a buyer’s purchase power.
“Higher tax bills change the affordability at every price point,” he said. “If it’s not in line with what you expect at that price, people will push back on price.”
Lawrence notes that overall, River Forest and Forest Park have much smaller housing inventories than Oak Park, so sales numbers in those villages can swing widely with the opening of a new development or the sale of a handful of expensive properties.
“Their numbers for this year are on pace with last year,” Lawrence said. “The numbers sold are relatively low, but they are holding steady.”
Attached housing sales in River Forest and Forest Park have remained on pace from 2017, but Oak Park has seen a large drop in condominium sales. Lawrence says closed sales for condos are down 20 percent from this time last year, and the median closed sale price has dropped from $176,000 to $165,000. He points to taxes and assessments figuring into those numbers.
“The issue may be who buys condos? Millennials, people coming out of school,” Lawrence said. “We hear about high student-loan debt and household formation lagging, so that might play into it as well.”
The local market may not be going gangbusters, but homes are selling at all price points.
“Oak Park is still a desirable community at the end of the day,” Lawrence said.