Rising Inventory in Illinois Housing Market Leads to Deals for Home Mortgage Seekers

With inventory stacking up and few Illinois mortgage seeks in sight, home sellers are starting to sweeten the deal - dangling plasma TVs, free appliance upgrades and offers to pay a year’s worth of assessments or property taxes - in the hope of enticing casual house hunters into signing on the dotted line.

“We all need buyers quite a bit,” says Tom Gilfillan, a northwest suburban Coldwell Banker agent.

Spring is traditionally the residential real estate industry’s busiest time. But with mounting inventory and a dearth of buyers, this selling season promises to be one of the most painful in memory for agents. Some say it could be a test of just how deep the real estate recession is in the Chicago housing market.

“This (season) will be one of the most closely watched in a while,” says Carl Tannenbaum, chief economist at LaSalle Bank in Chicago.

Some agents say traffic at open houses is picking up now that it’s spring, but they acknowledge that it’s harder to convert that traffic into sales.

“I’m telling all of my sellers, give me six months,” says Barbara Floyd, a Re/Max Signature real estate agent who’s sold real estate in Chicago for more than 20 years. “It’s taking longer to sell. . . . You can’t sugarcoat it.”

With homes languishing on the market for an average of 131 days — up from 84 in March 2006 — the supply of homes for sale in Cook County as of last week had risen 38% from last year to 43,339, according to the Multiple Listing Service of Northern Illinois (MLS).

Prices, however, have held up: The average sale price for a single-family home in Cook County rose to $303,375 in February, an 8% increase from a year earlier, MLS says.

But there are signs that sellers are beginning to crack on price.

Steven Huck helped his mother sell her Mount Prospect home last summer. The house was on the market for four months, one of 42 for sale in town within the same price range. After slashing the price 20%, the Hucks found a mortgage loan borrower for it.”We thought it was going to go a lot quicker because everyone liked the house,” Mr. Huck recalls.

The oversupply situation isn’t lost on those few buyers out there, says LaSalle’s Mr. Tannenbaum. The result: a game of chicken.

“If buyers sense that there are going to be bargains out there, and a lot of sellers are very reluctant to lower (prices) . . . the result of that is the waiting game,” he says.

And as property listings are multiplying, the pool of potential buyers is shrinking, notes Paul Kasriel, chief economist at Chicago’s Northern Trust Co. Stricter mortgage financing terms will disqualify many people looking to buy this spring, Mr. Kasriel predicts.

In the past, “anyone who had a pulse could get a mortgage,” he says. But “people who would have been able to buy a year ago are not going to be able to buy now.”

The slowdown in sales — fewer than 1,500 single-family homes sold in Cook County in February, a 20% drop from last year — has been sobering for some agents, especially those who flocked to the business during the boom, says Coldwell Banker’s Mr. Gilfillan.

“This is a rude thing for them,” he says. “They thought you could just get a license and stop by the Mercedes dealer, but that’s not how it works.”

Northern’s Mr. Kasriel sees no relief ahead.

“Realtors are going to have to work harder, and some of them are going to be taking other jobs because there’s not enough income to go around,” he says. “I think this spring will be a standout as one to remember - or maybe one they’ll want to forget.”