A few weeks ago on a Sunday morning I woke up and went about my morning routine. I made some coffee, grabbed my laptop, and crawled into bed and turned on the news. On the news this morning was a segment with two real estate agents speaking about the 2018 real estate market in the Chicagoland area and what we can expect the market to look like throughout the year. Naturally I was curious if their views would align with mine so I made sure to put aside my laptop and phone when the segment began to give it my full attention.
The talking points were the usual talking points you’ve probably seen on social media recently “Inventory is low” “The market is hot!” “Prices are up 5 to 7% year over year” “We are still far from peak prices during the boom. The market has more room to grow”
It was those last two statements that made my head hurt and quite frankly embarrassed to call myself a Realtor. What was upsetting was not the fact that the brokers were stating these “stats” but they were using them as justification for why now is a wonderful time to buy and why you should buy instead of rent.
I’m sure many of you are friends with multiple brokers on social media. If you’re reading this chances are you follow me as well. Being in the industry I follow many, probably near a hundred in total. After hearing the above statements on the news it also had me thinking about the amount of times I’ve seen other brokers make these statements on Facebook, Instagram and the like. Sharing of articles from random real estate groups, posting outlooks from brokerages, posting random statistics that make you feel like you’ve lost out on an opportunity so you better jump into the market now. All these statistics, while factual, are being distorted and not explained properly. There is a difference between a broker being a salesman (or saleswoman) and being your consultant. A good broker is not in sales, but instead is in consulting. They are there to guide and advise you. Once your home is listed for sale, then they turn into a salesman on your behalf. So without further delay let me quickly explain why I despise fellow brokers who spew the last two stats as justification for buying that I saw on the news.
“The Chicago market is up 5 to 7% year over year.”
First off I would have loved to have known where this information was gathered. Lets ignore the fact that there is a 40% variance in the above range, but lets talk about the word market. What market is up 5 to 7%? Chicago market? OK….where in Chicago? Gold Coast? Lincoln Park? Englewood? Roseland? What types of properties…Single Family homes, Condos…Two flats? What about land? What about new construction condos? Is this year over year average / median price data derived from total sales or are we only comparing exactly like units such as taking a sampling of the same buildings, same blocks, etc in certain areas? Now I know what you’re thinking…Paul this data is only meant to give you an idea of the market trajectory. I would agree with you. But if you’re making a large investment in a condo in the Gold Coast, wouldn’t you want stats that specifically focus on what you’re buying? Wouldn’t you like to know that market times and prices for higher end 1 bedrooms for instance is actually down year over year versus two bedrooms? And if we are going to talk about the entire Chicago market being up or down…shouldn’t you have a specific number? Why such a wide range?
“We are still far from peak prices of the 2006/2007 market. The market has much more room to grow”
This literally made me nauseous; I could feel my morning coffee start to come up as I listened to this comment. Why? Because it’s generalized statements like this made by either 1) Completely ignorant and stupid people in my industry or 2) People who are purposely trying to deceive consumers (I’m not sure which is worse) which is what contributed to the real estate bubble and crash we saw a decade ago.
The blanket statement is right, over the entire Chicagoland area we are not near the peaks of 2006/2007. However, in many areas and buildings we are BEYOND the peaks of those years. This “data” is contrived by looking at the entire area. During the peaks areas on the south and west side of Chicago along with a handful of suburbs were rampant with fraud. I saw it first hand. Burned out three-flats selling for $300k two days after selling for $200k. This propped up pricing in many low income areas of the city. What are these properties doing today? They’re less than 50 to 75% of those prices. We also need to factor in other areas that saw massive spikes due to random “investors” buying that drove up prices. These areas will take well over another decade and in some cases multiple decades to return to 2006 numbers.
Many areas of the city are at the peak or above the peaks. There is nothing wrong with this. Many areas are seeing tremendous growth and for very good reason. There are multiple areas that I believe will continue to grow very well and will be excellent investments. But I’m sorry, the continued spread of “we’re still far from 2006/7 peaks” is by far the worst data you could use as a reason to buy. The Chicago market is highly localized. It is localized down to neighborhood, down to certain blocks in that neighborhood and even certain buildings.
What data should you look at and listen to?
First off, find yourself a broker that you trust and that when you talk to them they have some basic understanding of the Chicago market as a whole. If they start spewing some of the generalized stats above of why it’s a great time to buy…run! Run like Forest Gump or like you just saw a clown in the woods in the middle of the night. Find yourself someone who is not going to sell you. Find someone who is going to listen to you and truly wants what is best for you. Find someone who truly understands the market place.
Your Realtor should be able to sit down with you and explain the market stats in the areas you’re looking and in the price point / size range you’re looking in. There is nothing wrong with buying a home that is selling for more than it did last year or selling for more than it did during the boom. But you want to make sure you have all the information so you can make a truly informed decision. Avoid generalizations that some brokers give you. Avoid generalizations that websites such as Zillow and Trulia give you. Get down to specifics and focus. You’re about to make a massive investment don’t you owe it to yourself to work with someone who is not only intelligent about the market place but also has your best interests at heart?
PAUL BLACKBURN IS A REAL ESTATE BROKER WITH @PROPERTIES IN CHICAGO. HE CAN BE REACHED VIA E-MAIL AT PAUL@PKBLACKBURN.COM