It's time to look ahead and make predictions for 2007
Now, as of October, 16, 2007, we’re heading into the final months of the year… and what’s happening?
Here it is toward the end of May...and my predictions are holding up. Take a look.
1) Our Naperville market is now officially in a "slower" market. Days on market, or the length of time that listings take to sell has doubled or tripled. Properties over $600,000 are taking up to 150 to 180 days on average to sell.
Longer market times…yes, definitely. Prices lower. Many homes have been relisted several times and commissions to buyer’s agents have increased. Many sellers will also pay some closing costs.
The list-to-sell ratio, based upon the last known listing price is 96%, which is very normal and what our market has shown for years. Lower priced homes generally will sell faster and closer to list as long as they are clean, easy to show, and offer the buyer some help.
And, the list-to-sell ratio is still at 96%…but now it’s figured on a reduced price. If it were figured on the original price, it might be between 90 and 92%.
Don't expect the market to change much this year. We're not reverting back to the "bubble" days. That's over. It's history for us.
As both our Fed Chairman and Secretary of Housing have mentioned, housing plays an important role in the economy!
Let me repeat: The bubble is over!
Let me repeat: The bubble is over!
2) Mortgage rates are almost where they were last year at this time. Just a shade over 6%, which is historically extremely low. It's possible that the economy will show a real slow down and that consumers will pull back, and if that's the case, then I expect the FED to reduce their over-night rates. And, mortgage rates could fall to 5.5% in that scenario. However, if we're seeing strong consumer sentiment, then we'll again approach mortgage rates closer to 7%.
The Fed did reduce over-night rates and conventional mortgages are around 6.5%. Jumbo mortgages, those over $417,000, however, are more expensive. I’ve seen them as high as 8%!
Many consumers who used NO money down and have negative amortization, will find it difficult to pay their monthly payment when the adjustable, adjusts upward. This will become evident during the third quarter when many mortgages will adjust.
I expect to see the foreclosure rate increase in the Chicago Metro area. Not by a lot. But it will increase.
According to Realty Trac (a company that tracks foreclosures) September was one of the highest months in its history. Expect to see more foreclosures.
We're seeing more homes in foreclosure, even out here in Suburbia. Chicago has a much higher rate.
Fewer lenders; fewer loan officers; fewer title people; fewer assistants. But, hopefully, those who remain know what they're doing! I see people using on-line lenders for comparison shopping...then going to a local lender who may be affiliated with a national name.
And, I didn't mention the sub-prime mess...which wasn't known in early January. Now, we've had several lenders go under and most of the rest have 'pink slipped' employees.
And now we have several more lenders who’ve closed their doors. And, many of the larger banks who thought that they escaped have discovered that they’re holding worthless derivatives…junk paper.
Lenders are using tighter standards as are appraisers.
3) Reduction in National Association of Realtors membership roster. Fewer agents staying. Many of the "old timers" will be retiring or going into part-time mode. Those agents who barely made it in '06 will be looking for a steady paycheck. But, many agents will warehouse their license with companies who specialize in this.
Some attrition in the number of agents, but, not as low as it will get.
4) More buyers using the internet and on-line search engines to find agents and properties. Could be as high as 85% this year. The convenience factor is strong. And, the younger buyers don't read papers or magazines, so they're looking for an agent on-line. And, these buyers expect that their agent will be tech savy!
Everybody uses the internet to search for homes. Newspapers have lost millions of dollars of revenue in print advertising.
On-line buyers are now over 85%. Many of them start their search with on-line websites. Especially relocating buyers.
Relocating buyers will "google" their future hometowns and get as much information as they can. They'll pay particular attention to the rankings of the schools; the commute time and the tax base.
Many buyers have discovered that Realtor.com isn’t up-to-date and is just too confusing to use. They want information that’s easy to get and relevant to their needs.
The Naperville area has great schools; high taxes and long commute times; and a wide and varied selection of homes.
And, again, I'll be explaining that we don't use square footage. Just a quirk in our market!
5) Seniors will comprise a larger segment of the market. As the baby boomers hit retirement age we'll see a shift in the type of properties that they own. Many will leave their two story McMansions and look for ranch homes; some will move into active adult gated sub-divisions.
We're seeing builders starting more "Active Adult" gated sub-divisions. However, they're getting farther and farther out. What we used to call the Boonies. In fact, I'm seeing some builders refer to DeKalb as a suburb of Chicago.
6) Our savings rate will continue close to zero. So, if one spouse is laid off or sick, many people won't have enough of a reserve to keep and maintain their properties.
This is scary. Putting money aside for the proverbial rainy day is a good thing. Too many people will discover that their parents were right! "Don't spend what you don't have."
7) More single woman will continue buying starter townhomes and condo units. They don't want to throw money away on renting. They want newer, nice...and most importantly, a safe, secure location.
Yes, several surveys have concluded that single woman are buying rather than renting. In fact, I'm betting that more single woman than single men are buying.
These are my 2007 real estate predictions and I'll be looking at them several times in the coming year to see how accurate I've been.
Hmmmmmmm…all of the above has come to pass. I feel that this dislocation in the market will take another two years to run its course. And, by that, I mean, till we see a market balance. It’s going to be a long, hard haul!
C 2007 Move Up to Naperville Blog, Eileen LandauLabels: 2007 Real Estate predictions, Eileen Landau, Naperville real estate
