Bidding Wars in Real Estate
The real estate industry has been unstable the last few years as a result of several factors and the economic recession. The prices of housing has been dropping and declining in a downward spiral, until now. The situation has recently changed and bidding wars have started to flare up all over the country and especially in Chicago and California.
Redfin, a home search and property value website, recently came out with a report that centered on each of the four big California markets. Over 80% of the offers that agents of the company put up in June, realized significant profits as a result of the rising home prices. 49.2% of the offers made in June got into multiple bid situations.
One thing that you should note is that Redfin saw a decline in the competitive bids that were made nationwide. In Chicago the circumstances were different with the percentage rising from May’s 48.4%. This deduction is based on the offers that the company agents were involved in that ended up in multiple bid situations.
This year has been a good year for individuals selling property in the real estate industry. There has been a quick turnaround in the housing market since the beginning of the year. The prices in some areas have sky-rocketed to a point that it has become hard to speculate how much higher new listings will go for. Hedge funds have a lot to do with this since they are overpaying for property in many situations, banking on appreciation.
Some agents who are experts when it comes to pinpointing sales prices have even failed to make the right projections. The micro-market that some houses are in may increase in value in a short duration, which marks the time from when a price recommendation is made to when the house goes into the market. Real estate agents aim to get close to the market value and then wait to see how things go from there.
There are a lot of houses that have been involved in bidding wars in the Chicagoland area. In Time Properties just recently sold a house in July and received $50,000 over their asking price. There is a high demand for a quality, fully renovated house. Another example was a property in Lincoln Park that has been on and off the market from 2009. The asking price was initially over $1.1 million before it dipped down to $924,500 towards the end of 2012. In May, however, it came back to the market and its price was higher. It was $999,000. A bidding war raised the sales price by over 2.7%. The deal was finally closed on July 8. These are just a couple of examples of houses that have been sold at a higher price as a result of bidding wars in Chicago.
Keep in mind it is a great time to sell property in many markets in the city but it is not necessarily a great time to purchase. In many cases, people get caught up in the bidding war and overpay for a house they are interested in. Also, homes in outlying suburbs are more stable and less bidding wars are going on.
Will Prices Keep Going Up?
A large hedge fund has recently backed out of the Illinois market and other hedge funds will probably follow suit. Many times hedge funds are the drivers of the multiple bid situations and overpay for property. Interest rates have also gone up as well so homes are not as affordable as they once were two months ago. One can only wonder which way the market goes heading into 2014 and beyond.