Local home values rise at healthy pace

Chicago's Northwest suburbs have experienced a 4 percent annual rise in home prices over the past several years, said Caroline Starr, a broker with Coldwell Banker Residential Brokerage in Arlington Heights.

“We felt the hit of the recession, certainly, but we have experienced a quicker post-recession rise than some other areas of the Chicago market,” she said. “The market in the Northwest suburbs is quite strong. Sellers are seeing the value of their homes rise because there is still a low inventory of available homes on the market. So most sellers are experiencing multiple offers and are getting about 95 percent of their asking price.

“In fact, the entire state of Illinois has seen home prices rise for the past 30 consecutive months and that is very positive,” Starr said. “The national market is also seeing a rise in average median prices and places like Florida, California and Arizona don't have as many distressed properties on the market as they did back in 2008 and 2009. The fact that banks are repairing and improving properties before they try to sell them is also improving prices for all homes because distressed properties in bad repair are no longer dragging down the market as much as they once did.”

Unfortunately, she said, Illinois has been slower to resell such properties because it is one of the states that demands foreclosures go through the courts and that takes much longer. Starr said at one time 28 percent of the homes on the market in the Chicago area were distressed. That number has now dropped to 15 percent.

Appraisers must still figure the sales of nearby distressed properties during the past three to six months into their “comparables” for the lenders, however, so foreclosures still hurt the market and keep prices somewhat suppressed, she added.

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

“We had a very strong spring in 2014 but it slowed down quite a bit in the third and fourth quarters. During the first quarter of this year, it has picked up again. There is still a low inventory so that is great for sellers because there isn't much competition and the average sales price is increasing. But the number of homes sold this year compared to this time last year is actually down half a percentage point.”

Are you seeing more movement in any particular segments of the market?

“The higher-end market, with homes selling between $450,000 and $700,000, is exploding.

“People are looking for larger homes with more living space in the same communities where they already live. Consequently, we are starting to see the $1 million homes come on the market, too.

“Condominiums are also selling — to investors and to down-sizers. Investors are once again buying them and renting them out where that is permitted. Empty-nesters are buying them to live in.

“Young professionals, on the other hand, are choosing to purchase single-family homes because they feel (houses) will give them a better return on their investment.”

What trends are you seeing among first-time buyers?

“Their age has increased. They are not as young as they once were. Most already have a child or two when they are purchasing that first home.

“Today's workforce is so transient that, before they have a family, they don't want to be locked down to one location.

“A few of the very savvy young professionals are purchasing homes and having their buddies pay them rent to live there, too. They are the ones who recognize that it is better to put money into their own property than into someone else's.”

What still needs to happen before the market completely rebounds?

“We consider a balanced market to be when we have six months of home inventory on the market. Right now we are teetering between four and 4½ months of inventory around the Chicago area so we could use more inventory.

“We also need buyers to realize that interest rates will definitely be going up. They have to go up. They have been sitting so low for too long. Right now you can get a 30-year jumbo loan mortgage for only 3.75 percent. We have never seen banks willing to lend so much money for such a long period of time at such a low interest rate. Those rates will be rising and buyers need to be prepared.”

For more information about Starr and her team, call (847) 222-8708 or visit www.cstarrproperties.com. Her offices are located at 792 E Rand Road, Arlington Heights.