With many potential buyers the combined factors of overall low housing prices, added inventory and distressed sales, purchase dollars are even more leveraged for more buying power. This could mean that higher priced homes have an exponential savings effect; the biggest winners and losers could be those at the high end of the market.
Then why have not seen significant movement in this segment? Higher end and custom home buyers may find that locating their ideal home may be more difficult in the current economic environment.
Many banks are holding back in the number of repossessed properties they put back on the market. Banks would take a significant loss if these properties sold on the current market place. Instead, the majority of properties coming to market from banks are home priced below $300,000, which also coincides with the segment that many first time home buyers purchased in during the boom.
Additionally, many owners in this segment are better able to weather the current market and are deciding to postpone their sale. Drivers of local supply and demand, such as affordability and unemployment, do not affect this demographic as much as first time homebuyers.
I took a small sampling from the five highest most expensive neighborhoods in the area, based on Q2 average selling prices: Near North averaging $3.7M, Lincoln Park $1.8M, Lake View $1M, Near South $892k, North Center $727k. The year over year data from these neighborhoods show a significant decrease in number of homes on the market from five years ago.
Near North shows -71% inventory when compared to five years ago, Lincoln Park is -25%, Lake View is -46%, Near South is 0%, North Center is -32%. It should be noted that two of these areas have less than ten properties on the market per year, which could largely influence percentages.
So with less inventory in this market segment, sellers should have no problem finding potential buyers, right? This same segment, historically accrues longer market times. Market times for the same five neighborhoods above have increased market times from five years ago, save for two areas Lincoln Park and North Center. Many buyers are still waiting to find the right home, prioritizing needs more than cost-savings.
Sherwin is a REALTOR® in the Chicago & Suburban area with @properties. Questions can be forwarded to Sherwin Sucaldito
”Finding Sanctuary” by Sherwin Sucaldito is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.
Based on a work at realtyevolved.net