Next generation can now afford the suburbs

People with cash are starting to invest it in real estate again, realizing the deep discounts they can get on properties make the slight risk that remains worthwhile.

Andy Starck, president and CEO of Prudential Starck Real Estate, based in Palatine, has heard tales from his agents of sellers bringing checks for $40,000 and $50,000 to closings because they realize that by taking that kind of loss on their current home, they can trade up and get an incredible deal on their next house — paying, for instance, only $500,000 for a house that several years ago would have sold for $800,000.

“More of the people who are able to do that, are now willing to do it, as well,” Starck said.

“While I can’t say for sure that prices won’t still go down a bit more, I feel that we have reached a floor for prices, as demonstrated by the fact that we are now seeing more multiple offers on relocations, better homes and foreclosures. That is good,” he said.

What are you seeing in the current Chicago area real estate market?#147;We are selling fewer homes than we did in 2010, but last year we had the federal stimulus and this year, we do not have that. On the other hand, we are ahead of where we were with regard to contracts and closings at this point in 2009, when we had a stimulus program, but for first-time buyers only. So that is good news and I am looking forward to a much better second half as the economy strengthens.#148;Starck also said Chicago-area housing inventory is shrinking as sales begin to whittle away at it. In fact, that inventory has shrunk by 14 percent since the beginning of the year, a statistic that was helped by the fact that 17 percent fewer listings were added to the Multiple Listing Service during the first four months of 2011, compared to the same period in 2010.Unfortunately for sellers, however, while bank foreclosures have slowed, Starck is seeing Fannie Mae and HUD starting to release their foreclosed inventory at very low prices, thus keeping the rest of the market down. The average price of these foreclosed homes in the Chicago suburbs has been $87,000.#147;But I am also hearing that tradesmen like painters are starting to get more business again #8212; maybe thanks to investors buying foreclosures and fixing them up to resell them.#148;Can most Chicago area homeowners afford a home at current prices?#147;According to national statistics, the entire Midwest now has an affordability index of 239.6, which means that the typical family has more than twice what they need in order to buy a median-priced home and put 20 percent down.#147;Remember how we wondered how our children would ever be able to afford to buy a house in this area? Well, thanks to this recession, they can afford to buy houses again. So that is one of the good parts of all of this.#148;How does the Chicago area market differ from what you are hearing about the national market?#147;We are doing better than some parts of the U.S. and worse than others. According to figures from the Federal Housing Finance Agency, between the second quarter of 2007 and the fourth quarter of 2010, Chicago-area prices fell, on average, 23 percent. Compare that to a 46 percent price drop in Miami, a 36 percent drop in Los Angeles, a 30 percent drop in Atlanta and even a 25 percent drop in Minneapolis. I couldn#146;t find results for Phoenix or Las Vegas, but they are certainly extreme, too.#148;Places like Dallas, Houston and Washington, D.C., saw smaller drops than Chicago. Denver#146;s prices might have even increased very slightly, Starck said.#147;Raleigh-Durham (N.C.) was holding up very well for a long time and then even they had some problems at the end of last year.#148;Are first-time buyers stepping into the market and taking advantage of the low prices and the low interest rates?#147;People are starting to realize that they can buy a house for about the same price as they can rent it, so they are starting to consider buying. And it has become slightly easier to get a loan recently.#148;More prospective first-time buyers are seeing this as an opportunity to get in at the bottom of the market and ride it back up, he said.Is the price of gasoline having an effect on buying decisions?#147;There used to be a steady stream of cars heading out to Rockford, Will County and Belvidere, but not so much anymore. Since prices are down in the closer-in suburbs like Arlington Heights, more people are choosing to stay closer-in because they know it not only saves money on gas, but it gives them more family time and alleviates a lot of other issues.#148;What still needs to happen for the residential real estate market here to rebound once and for all?#147;We need to stop losing jobs in this state. The politicians need to listen to the corporations that are having conversations about leaving the state and realize they are truly upset, and figure out what needs to be done to stop them from leaving our area.#148;In addition, he says #147;sellers need to remain realistic and buyers need to not be afraid.#148;#147;People also need to forget about using their homes as ATMs and move on with living their lives. If they need a bigger house or a smaller house, buy it and enjoy it #8212; without considering it a moneymaking venture.#148;Anyone who purchased their home before 2003, Starck said, won#146;t lose money if they sell it now, unless they took equity out of it somewhere along the line. In fact, someone who has lived in their house for 20 years can still expect an 81 percent increase in selling price, by his calculations.