Chicago Luxury Home Sales Strengthen as Prices Soften
Luxury home sales in the metropolitan Chicago area rose during the second quarter of 2017 while the suburban luxury market continued to perform well, according to the recent RE/MAX Luxury Report on Metro Chicago Real Estate.
However, high-end sellers are still feeling somewhat pinched, as buyers are demanding (and getting) lower prices for luxury properties due to large available inventories.
Luxury homes priced at $1 million or more saw sales rise 13.4 percent from the first half of 2016, with 1,347 properties sold in the six-county area, with sales of all homes up 3.9 percent year-to date.
According to the RE/MAX report, sales of luxury estates rose, with 22 homes valued at $4 million or more sold in the first six months of the year, compared to 16 in the first half of last year.
After rising 31 percent in the first quarter compared to the same period in 2016, metro Chicago second quarter sales rose 8 percent to 899 units, and the median sales price hovered at $1,300,000.
Prices Slip Due to Inventory.
Prices in the 1 million-and-up sector are slipping, as buyers are biding their time, questioning prices and breaking down sellers, who are frustrated by the need to slash prices, especially in affluent suburbs.
The average local sale price in the luxury market was $1.6 million in the first half, 3.3 percent below the average in the first six months of 2016.
Even though sales data shows there are a lot of high-end buyers in the Chicago market, in many areas there exists an oversupply dictating a lower price point.
"The good news is that luxury sales for the second quarter were the highest we've seen since we began tracking that data in 2011, and the suburban luxury market showed continued signs of improvement after a slow year in 2016," RE/MAX Northern Illinois executive vice president and regional director Jack Kreider said.
"What concerns us is that the growth in the inventory of unsold luxury properties in Chicago has risen significantly this year,” Kreider said. “However, it is encouraging to see that luxury sales in the city did register a modest quarterly gain."
Chicagoland Luxury Lessons.
Sales of luxury homes in Chicago rose 7 percent in the quarter to 496 units. The median sales price was $1,342,500, a decline of 2.2 percent. The luxury inventory in the city expanded by 26.3 percent to 1,132 units. Average market time was 142 days for homes sold during the quarter, up from 126 days a year earlier.
So, not only are there more homes on the market, prices are declining, and time on the market is increasing. This is more than troubling for the high-end luxury market.
For instance, in fashionable Lincoln Park there has been only one sale of the 14 available homes priced at $5 million or more. The Gold Coast possesses 19 at $4 million or more, and even though Lakeview is fairing better, there are still far more homes listed than are being sold, and prices are going lower.
Closed sale prices on Lincoln Park houses were down almost 14 percent from 2016, according to data released by the Chicago Association of Realtors.
"It was time to talk turkey with my luxury home sellers," Berkshire Hathaway HomeServices KoenigRubloff Realty Group agent Jeff Lowe said. "If you want to get it sold, you have to react to the market. The over-supply is definitely telling people to make their prices more realistic."
“The luxury inventory is more than I've ever seen," Related Realty agent Bernadette Kettwig said. "The amount of inventory in the $2 million and above segment is exceeding demand, and will drive prices down."
An Endemic Situation.
Lincoln Park isn't the only place where luxury homes have been lingering. The market witnessed a pronounced slowdown in many other areas featuring prime Chicago luxury real estate. According to a report from Chicago Agent magazine, in 29 of the city’s suburbs, the luxury home market inventory currently represents more homes than sold in the previous 12 months.
“Lakeview and Lincoln Square both have too many high-end homes for sale, too,” Keller Williams broker Niko Apostal said. The situation would be even bigger, Apostal said, if everyone who wanted to list a home did. “There are more than 40 homes in a large latent inventory that people are holding back because of what they're seeing."
The big issue is that prices are dropping around the luxury market, and thinking you’re in a buyers market is counterintuitive.
“Agents don't typically discourage people from putting their homes on the market, but when the numbers look like this, I have a responsibility to talk to my clients realistically about what they can expect," Coldwell Banker agent Jennifer Ames said.
Yet, Lincoln Park and downtown have been among the most resilient areas, said Jim Kinney, vice president of luxury homes for Baird & Warner. The suburbs are facing the challenge of changing tastes and demographics, but seem to be reaping the benefits of the current luxury market challenges.
“The impact of lower prices will fall harder on residents who sell now,” agent Carrie McCormick said. “If you're an empty-nester counting on the sale to fund your next home, this is your only sale," she said. "Selling for less makes more of a difference."
“The result is a painful process as people wait for months to sell large luxury homes and ultimately cut prices sharply,” Griffith Grant & Lackie agent Lisa Dooley Trace said.
Buyers are cautious now about buying large homes, Trace said. "They are savvy. They know that people lost millions of dollars as homes fell 35, 40 or 50 percent during the horrible correction. That's made people conscious about risks in buying them."
Interested in buying or selling in Chicago? Let us know, and we'll connect you to a trusted agent.