Education And Inventory Are Keys To Rebound In Housing Market, Says RE/MAX Executive

For the Chicago-area housing market to rebound from the correction it has been experiencing will require a combination of education for buyers and sellers and a reduction in the current level of homes for sale, according to Jim Merrion, regional director of the RE/MAX Northern Illinois network.

Speaking to a real estate industry gathering at the University Club of Chicago on April 9, Merrion stressed the need for real estate professionals to give buyers and sellers a realistic perspective on the current housing market.

“Educating buyers and sellers is always an important function for real estate professionals, but that is truer today than it has been in recent years,” said Merrion. “There is a lot of misperception out there because our customers are seeing news reports about the housing market that are often based on activity in other areas of the nation where problems are more severe than in Chicago.

“At the same time, much of the local market coverage they see is based on data that is months old and doesn’t offer an accurate picture of current conditions,” he said. “The market here is experiencing a correction, but it remains relatively strong, especially when compared to areas like Florida or California.”

Merrion urged agents to keep buyers focused on their needs as they shop in a market where so many homes are available. Otherwise, buyers can become frustrated looking at dozens of properties that don’t offer the features they want at a price they can afford.

A second key message for buyers, according to Merrion, is that all sellers are not desperate to sell at any price.
“Buyers today often expect to negotiate a substantial reduction in the price of a home, regardless of its list price,” he noted. “In many cases, sellers have priced their properties quite aggressively to begin with so they aren’t disposed to further significant price reductions. A quick sale is essential only for a minority of sellers. In fact, many are prepared to sit tight if they don’t get what they believe is a fair price.”

As for educating sellers, Merrion contended they need a real estate agent’s help to price their homes properly in the first place. Most sellers understand the concept of basing the price they ask on the sale prices of comparable properties. Today, however, what constitutes a comparable property is quite different than it was a year or two ago.

“The market is changing so rapidly that sales made more than six months ago have little value as comparables, and if possible, it’s best to consider only those sales that closed in the last three months,” Merrion said. “It’s also extremely important to make sure sellers understand how even recently sold properties differ from the home they are selling. That’s because buyers can choose among so many homes today. Even relatively small differences in such things as room size, layout, amenities or overall condition can make a real difference in what buyers will offer.”

He also noted that because competition in the marketplace is so intense, sellers must be made aware that they are best served by getting their property it top condition before putting it on the market.

“First impressions count. Many agents and buyers will see a home during the first few weeks it is on the market,” Merrion explained. “If a seller waits until the home has been listed for a while before fixing the storm door or replacing a stained carpet, it will be too late to change the first impression of all those prior visitors. I’m encouraged to see that many sellers now are doing what is required to get a property in top shape prior to listing.”

As for the need to work through the large inventory of homes already on the market, Merrion contends that pricing is the key.

“The old saying in our business is that ‘price cures all,’ and that’s just as true today as it ever was. I believe a necessary but modest additional correction in prices could happen over the course of 2008 and is likely to attract a considerable number of buyers into the market, especially first-time buyers and investors,” he said. “A lot of these folks are sitting on the fence right now, and drawing them into the market would make a huge difference.”