It wasn’t long ago that mansions in the Chicago’s northern suburbs were in high demand. There were bidding wars, brokers scrapped for listings, and prices regularly eclipsed $1 million. But in the past decade, the luxury market has turned sluggish. In many towns, sales are declining, prices are lower, and homes are lingering on the market longer. As sellers who snapped up seven-figure suburban mansions head for warmer climates or downsized downtown condos, many are having finding buyers anywhere near their asking prices.
This market shift hasn’t just impact sellers, but also the residential brokers tasked with selling these homes. These brokers have had to get savvy, finding new ways to evolve their business strategies while working around the new realities of the market.
An Re/Max Premier report showed sales of Chicago area homes priced at more than $1 million were down 11.3 percent in the second quarter of 2019. That’s on top of seven years of consecutive year-over-year decline. Second-quarter luxury sales fell 9 percent in Chicago but 13.5 percent in the Chicago suburbs.
“I think there are still people that want to buy expensive homes, but they’re fewer and far between,” said Lanny Brooks, a North Shore residential broker. “Tastes are changing, and I think the demographic of homebuyers are changing. Older and expensive are having problems.”
So, residential brokers are getting creative. When Dawn McKenna of the McKenna Group in Hinsdale noticed upper bracket homeowners in their 60s looking to downsize or relocate to Florida, she used it as an opportunity to expand her business to downtown Chicago and open a Naples, Florida branch. Now, she has a better understanding of who is moving between markets and who is upsizing or downsizing. “If you want to play in the luxury market you have to have perspective,” she said. “No longer can you just put a sign up and hope somebody calls.”
Having this bird’s eye view of the market pays off. She’s even arranged for young families from the city and couples in the suburbs to swap their properties.
Brooks tries to get buyers in older, expensive homes by encouraging them to think 10 to 15 years down the road. He said new construction looks good now, but as the home ages and tastes changes, buyers might be better off in an older home with good bones in a better location.
The new market is also forcing brokers to have a sharper understanding of buyers’ motivations. Older style homes often don’t fit the styles young families are looking for. They want open concept floor plans, not houses broken up room by room. And, more than before, they want a house move-in ready–they’re not looking to live through demos and renovations. While part of this McKenna and Lanny Brooks attribute to time — who wants to oversee a renovation project after a long day at work? — money is also an issue.
For people with a set down payment budget, immediate renovations aren’t on the table. They can afford even slightly higher down payments on new construction, but don’t have extra cash on hand for the changes and repairs they’d need to personalize an older home.
Furthermore, many of these young buyers are extremely cautious. They watched people lose their homes or see their house values plummet in 2008. They don’t want to take any chances.
In response, sellers have lowered their asking prices, sometimes by as much as 50 percent, said Margie Brooks of Baird & Warner. “We keep thinking it’s not going to get worse, and it gets worse and worse,” she said. “The higher end is taking a huge hit.”
For McKenna, making clients happy is about putting the house on the market at a reasonable selling price the first time around, and reminding the seller they’re in it together. “The conversations are hard,” she said. “[But] you’re in it with them. My house’s value goes down if I plunge somebody else.”
Margie Brooks agreed. “I tell my sellers that if you want to sell, you have to go on at a reasonable price,” she said. “The idea of testing the market and seeing how you do and you can always adjust doesn’t work.”