I haven’t been able to post for a while, and this one will have to be short. The spring market is now in full swing. After sales were down 34% and 27% in January and February respectively for the Chicago Metro area as compared to last year, we are on a rebound month.* Given sales trends in my office, I expect April sales to be up a little bit.
Who is buying? I can only speak for my slice of real estate reality, but I am seeing a lot of high IQ buyers right now. Gone are the heady days of speculative bidding where a buyer in a multiple offer writes that he will pay one dollar over whoever makes the highest bid, oblivious to the real consequences of such a bid, focusing only the idea of “winning” the home with the highest offer. Eek!
Instead, I am seeing a lot of quietly intelligent move-up buyers. I don’t want to over-generalize, but it seems like a lot of MBA/engineering/techy types are in the market, i.e., analytical thinkers. These Midwestern-Warren-Buffett-style buyers are quietly shopping on the internet and stopping by open houses. He or she, or frequently he and she (i.e. couples), tend to be more cautious, less impulsive, and very well-read about economic trends. This is not the aforementioned flashy-speculative type who would outbid anyone four years ago; it is a buyer who is more than happy to walk away from a deal if he or she does not get the right price. They’re not in a hurry, but they also know how to recognize an opportunity when they see one.
I like working with these buyers. They make negotiations tense, but rewarding. When I have a buyer who is truly willing to walk away, I know we can get a good deal. It may not be on the first home we make an offer on, but ultimately that buyer, as long as he or she has the emotional stamina, will do well. The key to getting your price as a buyer is the ability to say no and mean it. Sellers and listing agents can sense when a buyer is bluffing. On the other hand, they will give up more if the buyer is looking around the corner at an alternative purchase. This gives me a lot of power to wrangle out favorable terms.
I also enjoy my Buffettesque buyer because I can learn from him or her. They enjoy talking shop. I like to do research, and the savvy move-up buyer is interested in the data. Furthermore, this buyer will also bring her experience and perspective to the process in a manner that enriches my practice. They ask difficult questions. And, they understand what risk is. This makes my job easier because the concept of risk is almost impossible to explain. It seems easy enough, but a intellectual understanding is not as important as viscerally getting it.
So, that is my slice of real estate reality. The market is not crazy, but it is gaining momentum. It is hardly a time I would advise down-sizers to sell, but it is a good time for buyers with good credit profiles to benefit from low interest rates and low prices.
*data from Illinois Association of Realtors, Market Report, 4/4/08
