Smaller inventory of homes is big factor in improved market
Jim Regan has been selling homes in the Arlington Heights, Mount Prospect, Des Plaines area for 40 years, originally as the owner for National Sunrise Realty in Arlington Heights and, for the past decade, as an agent with RE/MAX Suburban in Mount Prospect.
So he is well-versed and, he admits, "rather myopic" about the ups and downs of those markets.
"When I look back on the first 11 months of 2012 here, the two adjectives I would use to describe the market are 'encouraging' and 'rebounding'," Regan said.
"As of the end of November, I have seen the number of single family home sales in Arlington Heights rise by 41 percent over the sales in 2011. In Mount Prospect, the numbers are even more dramatic. We have seen a 59 percent increase in single-family (home) sales. In Des Plaines, the sales have risen by 32 percent, also impressive," he said.
Prices in those markets, however, have remained static or have fallen very slightly. The average price for a single-family home in Arlington Heights is $331,000, compared to $333,000 last year. In Mount Prospect, the average price is $273,000 compared to $275,000 a year ago. Finally, the average Des Plaines home price of $206,000 reflects a 4 percent decrease over 2011, Regan reports.
Sales of condominiums in these markets have also risen year-over-year -- by 44 percent in Des Plaines, 21 percent in Mount Prospect and 17 percent in Arlington Heights -- with prices remaining static in Mount Prospect and dropping by 5 percent in Arlington Heights, he said.
The reason behind this improving picture is simple, Regan believes. Inventory -- the number of homes for sale -- is at its lowest point in two years. Based on the average number of home sales per month, there is now only four months worth of single-family home inventory and 3.4 months worth of condominium inventory available to prospective buyers.
"We are at the bottom on the market; interest rates are still between 3 and 4 percent; and prices have fallen between 30 and 40 percent since the height of the market," Regan said.
"There is now a feeling among investors and other buyers that they can't lose. The conversation has changed from prospective buyers fearing they could lose money on a purchase, to fearing that they could miss the bottom of the market if they don't act soon. So nice homes are usually not on the market more than a month now," he said.
Have first-time buyers with no home to sell been purchasing?
"Nationally, it is said that 51 (percent) to 52 percent of the current buyers are first-time buyers. But among my buyers, that number is closer to 60 percent. Prices are low and rents are high, so young people are seeing the value of buying."
The other large buying group Regan sees in the marketplace is investors who want to rent out the properties for additional income. They are enticed by the low prices at which they can purchase property and the high rents they can then get for those same properties.
"Investors know they can get a positive cash flow on their investment properties right away and that is enticing."
What needs to be done to keep this promising trend going?
"We need to keep (mortgage) interest rates between 3 and 4 percent.
"We also need to allow people to refinance their mortgages without an appraisal. Even if they are negative on their mortgage, let them refinance to a lower interest rate so they see a benefit to staying in their house and not letting it go into foreclosure or a short sale. We don't need any more troubled properties coming onto the market and dragging it down further."
Finally, Regan said, condominium associations need to rethink their prohibition against unit rentals. "Those rules are preventing investors from buying units to rent and they are also preventing people who cannot sell their condominiums from renting them and buying something else. Those outdated rules are actually hurting condo associations now."
Regan can be reached at (847) 259-0202 or at email@example.com.