Homes must priced correctly to create interest

Andy Murphy, his wife and father-in-law are relatively new to the real estate market. They started their McHenry-based Century 21 franchise two years ago and now have five offices in Lindenhurst, McHenry, Crystal Lake, Barrington and Algonquin.

So Century 21 Roberts and Andrews, as their firm is known, can say something that few other real estate firms can: They have grown over the last two years as property values and sales numbers have fallen.

"We have grown from 120 agents last year to 161 agents this year and we are in the process of developing a commercial department and a relocation department," Murphy said.

"We have motivated local agents who are very familiar with the towns they sell in, so we feel that we are poised to make a good run when the economy turns around, as it surely will," he said.

"We knew that we were coming in at a strange time but we felt that if we attached ourselves to a strong brand like Century 21 and a good system, we would do well in the future," said Murphy, a former WinTrust Bank official.

Acknowledging that the real estate market is very difficult right now with total sales volume in their five communities down 33 percent over the same time last year, and with their own offices' sales volumes down 10 to 15 percent over the same period last year, Murphy said he is still optimistic about the future of the real estate market.

What is the current state of the Chicago area real estate market?

"This is a great time to buy and you can also sell right now, but you have to be in the top 5 percent of your price category to even get a look because there is so much competition out there.

"There is a year or more of inventory on the market right now so it has never been more important to price your home correctly and if you are in a pre-foreclosure situation, that is tough."

Interest rates are currently at all-time lows, Murphy said, so that is very positive. But the fear of unemployment is curtailing purchases.

"We need to create jobs in order to regain consumer confidence and stabilize the real estate market long-term."

How does the Chicago area market differ from the national market?

"Historically, Chicago's real estate market has always been less volatile than the coasts. I think that is because the cost of living is higher on the coasts than it is in the middle of the country.

"Things aren't great anywhere right now, but real estate is a local industry. You are not going to see the major swings in Chicago that you see in places like Florida, California and Arizona."

Do you see more movement in any specific sector - single family, condominiums, townhouses?

"Because prices on single family homes have declined an average of 20 percent and prices on attached units have only declined 5 percent, we are seeing a bigger decline in sales numbers on condominiums and attached properties than on single family homes. More condo owners seem like they are not in a hurry to move and can afford to be stubborn about their price."

As a result, buyers are seeing that they can get a larger living space and a yard for about the same price as they can get a condo or townhouse, Murphy said, and they are opting for the single family homes, skipping the intermediate step.

What differences do you see between the city and suburban markets?

"I have a number of agents who occasionally do business downtown and what we are finding is that 80 percent of our inventory in the suburbs is single-family homes whereas downtown there are many more condos and townhouses.

"There is so much inventory in the downtown condo market that last year they saw a 25 percent decrease in sales prices compared to a 15 to 20 percent decrease in suburban sales prices and the downtown prices were higher to begin with."

Are first-time buyers with no home to sell taking advantage of the buyer's market?

"Activity has picked up a little, but we haven't seen the big explosion of lookers we were hoping for. We need to better educate people about the $8,000 tax credit to make sure they understand it."

Statistics show, Murphy said, that last year 40 percent of buyers in the Midwest were first-time buyers. So he considers that a step in the right direction.

What steps need to be taken to help strengthen the Chicago area real estate market?

"I would love to see the state of Illinois come through with the 1 percent state income tax credit they are talking about for anyone who buys a home in 2009, 2010 or 2011. So many people, not just first-time buyers, are on the fence about buying a new home and maybe that credit would help."

He also said credit markets need to be opened up so that unemployment becomes less of a worry for potential buyers. Murphy said many of their suburban communities are experiencing unemployment "dangerously close to 10 percent."

"The further out from the city you go, the higher the unemployment we are seeing."