Steady real estate market is a healthy one, brokers say

Is the suburban Chicago real estate market getting better, or worse?

You may have read home sales are slightly down, but prices are slightly up.

"We are looking at a real estate market this year that is very similar to the market of 2013. There has been a bit of an improvement in terms of supply-and-demand, so prices are up about 2.9 percent this year. But, for the most part, the market has remained fairly steady," said Lynn Klein, managing broker and owner of Century 21 New Heritage in Hampshire.

"We are finding that buyers are willing to pay increasing amounts for houses that they really want, but we still sometimes run into problems with the mortgage appraisals. The banks continue to be very cautious, so if the appraisals cannot come up with enough comparable homes selling at similar prices, the banks refuse the financing. Since 99 percent of buyers need to get a loan, that remains a problem," she said.

There are additional issues when it comes to the financing of townhouses and condominiums, said Klein's daughter and business partner, Lisa Klein-Rossow. Special financing issues occur when too many of the units in a particular condominium community are occupied by renters, for instance. That is why the sale of multifamily units continues to lag behind the sales of single-family homes.

We asked the Kleins a little more about the current market.

Do local home sales differ from what you are hearing about the national real estate market?

"Illinois is lagging behind other parts of the nation in terms of recovery. But we were also one of the last places to hit bottom during the recession. Besides, other places hit a deeper 'bottom' than we ever hit," Klein-Rossow said. "I was just in Arizona, for instance, and I would say the recovery that they are experiencing today is probably what we will be seeing in about six months."

What changes have you seen in the market in the last year?

"There has been a definite decline in the number of foreclosures and short sales during the past year," Klein-Rossow said. "Those types of sales used to be a significant part of our business and now they make up a very small segment."

Prices on these types of "distressed" sales have also risen over the past year because banks are no longer willing to let them go at bargain prices because they are seeing a rise in real estate prices overall. Foreclosures are now selling at prices much closer to fair-market value.

"In general, investors are now the ones interested in buying distressed properties," she said. "First-time buyers don't want to wait the many months it takes to buy such a property and most traditional buyers don't have the necessary capital to make repairs. So they have pretty much been given over exclusively to investors."

Distressed properties are also no longer having a huge impact on the traditional market, both Kleins said. Enough traditional sales are taking place that appraisers no longer need to use short sales and foreclosures in their evaluations.

Do you see many first-time buyers taking part in the market?

"Even though housing prices have gone up a bit in the last year, it is still a great time for first-time buyers and veterans to purchase homes because there are huge state and federal incentives being offered," Klein-Rossow said. "For instance, first-time buyers and those who have not owned a home in the last three years can take advantage of the 'Welcome Home, Illinois' program that gives them up to $7,500 in down payment assistance and low interest rates on either FHA or traditional loans."

As a result, she said, between 30 percent and 35 percent of Century 21 New Heritage's current business is coming from first-time buyers.

What needs to happen for the local real estate market to fully bounce back?

"I think this is the 'new normal' and I hope that we never go through another housing boom because when we experienced a bust, it threw the whole economy into recession," Klein-Rossow said. "I think an annual growth rate of 2 (percent) to 3 percent (in home values) is healthy. It is also what we have experienced on an annual basis, historically. So, I hope that we continue on this current path. Each year we are getting a bit better and a bit stronger.

"Inventory levels are rising as people are becoming more open to selling again and as people gradually climb out from being underwater on their mortgages.

"Unfortunately, if someone refinanced their home two or three times over the past decade, they probably still won't be able to sell their home unless they can afford to bring money to the table at closing," she said.

"And that, in turn, is creating a rental market. Every day we have people asking us to help them rent their property and every day we have people who cannot buy, due to an earlier foreclosure, asking for a home to rent."

The Kleins can be contacted at (847) 683-2000 or by visiting www.newheritage.com.