Yesterday, President Obama signed into law one of the largest pieces of legislation in American history, The American Recovery and Reinvestment Act (a.k.a. the economic stimulus package), a $787 billion mix of tax breaks and government spending intended to jumpstart the U.S. economy.
I’m not a macro economist, so I can’t comment on the broader implications of the bill. However, I do understand the Chicago residential real estate market, and from what I’ve seen lately, the passage of the bill seems to be having some effect, whether direct or psychological, on home buyers in Chicago.
A Crisis of Confidence
Since the major shocks to the economy that occurred last September, potential buyers have suffered from a serious confidence problem. A small number of courageous buyers stepped up to capture what they’ve seen as great values, but most buyers adopted a “wait and see” attitude.
In the meantime, mortgage interest rates dropped to historic lows, sellers lowered their prices in an effort to make their homes more attractive, and the pent up demand among buyers grew. The only factor that seemed to be holding the market back was consumer confidence.
Are Chicago Buyers Back?
In the last week, that confidence crisis dam seems to have broken. Buyers are in the market in full force. My conclusion is based on the following indicators:
The number of buyers and agents requesting to see the homes I have for sale has recently doubled. More importantly, many of those requests are from people who are coming back for a second or third time to see properties they like. This demonstrates an increased level of seriousness.
The quality of visitors at our public open houses has improved. Until this past weekend, most of the people who stopped by our open houses were nosy neighbors or people who were hoping to move but needed to list and sell their current home before buying. As of Sunday, February 15th, the three open houses I hosted were packed with serious buyers who were out systematically looking at properties with the intent of purchasing a home in the near future.
In the last week, I received four offers to buy homes I have for sale, and I wrote an offer for one of my buyers. The ensuing negotiations resulted in three sales including two at the high end of the market with sale prices of $3.6 million and $5+ million.
Correlation or Causation?
I cannot verify that the apparent shift in consumer confidence is directly linked to the passing of this legislation, but the timing is uncanny. Whatever the cause, my seller clients and I are certainly not complaining about the “spring fever” that has sparked new energy in the residential real estate market.